National versions of guidelines on funds’ names now published

On 21 August 2024, the European Securities and Markets Authority (“ESMA”) published their guidelines on funds’ names (the “Guidelines”) in versions translated into all the official EU-languages.

The Danish translation of the Guidelines can be accessed here. The purpose of the Guidelines is to provide guidance, set out criteria and clarify the use of ESG or sustainability-related terms in fund names. Further, the Guidelines shall ensure that investors are protected from misleading use of fund names by specifying when fund names are no longer fair or clear.

We have previously made an Pulse Update on the Guidelines which in details specifies the criteria for funds’ names.

The Danish Financial Authority (“The Danish FSA”) has commented on the Guidelines in connection with the publish of the translated versions. The Danish FSA notes initially that the terms and words specified and categorized in the Guidelines are not exhaustive. Therefore, it will be a specific assessment of which criteria a fund will have to live up to in case the term used in the naming does not appear in the Guidelines.

Further, the Danish FSA has noted that the term “responsible” (in Danish “ansvarlig”) does not appear on the list of key terms in the Guidelines. The Danish FSA has observed the use of the term in Danish fund names and assesses that the use will generally fall under the “environmental and impact” category, which is further elaborated on in our Pulse Update. Therefore, “responsible” shall be seen in line with the use of the abbreviations “ESG” (Environmental, Social and Governance) and “SRI” (Socially Responsible Investing) which appear on the list.

Due to the new Guidelines for naming funds, the Danish FSA expects that the pre-contractual documents for the fund (typically the prospectus) will clearly state the conditions that support the name when it is ESG or sustainability related. Therefore, the Danish FSA expects funds to elaborate how they meet the criteria for fund names, including the use of exclusion criteria for CTB (The EU Climate Transition Benchmark) and PAB (EU Paris-aligned Benchmark).

Next step: The Guidelines will apply from 21 November 2024 for funds established after this date. For funds established before 21 November 2024, the Guidelines will apply from 21 May 2025. The Danish FSA must notify ESMA within two months whether they a) comply, b) do not comply but intend to do so or c) do not comply with the Guidelines and have no intention to do so.

Tags:  ESMASustainability