On 17 December 2025, the European Securities and Markets Authority (ESMA) issued its latest TRV Risk Analysis covering the impact of its guidelines on the use of ESG or sustainability related terms in fund names.

Based on nearly 1,000 shareholder notifications from the 25 largest EU managers with assets under management of EUR 7.5 trillion, ESMA observes that two thirds of the funds reacting to the guidelines changed their name and more than half updated their investment policy – mainly by introducing fossil-fuel related exclusions. The majority of name changes involved removing all ESG terms, with half of these funds adopting alternative terminology in their name.

ESMA also focuses on the impact of the Paris-Aligned Benchmark criteria excluding companies involved in fossil-fuel related activities. Its portfolio analysis of 4,000 EU funds using ESG terms in their names with EUR 2 trillion in assets under management shows that funds with higher fossil fuel exposures were more likely to remove ESG terminology, highlighting the role of portfolio composition in compliance choices.

Since the publication of the guidelines, ESMA finds that funds retaining ESG terms in their names have reduced their portfolio share of fossil-fuel holdings more than all other funds, suggesting efforts to green their portfolios. These results indicate that ESMA’s guidelines have driven convergence in the use of ESG terms by improving the alignment of fund names with their respective investment strategies.