ESMA has published its third anti-greenwashing thematic note in eighteen months, this time aimed squarely at positive impact and climate transition claims made for funds and bonds — and it lands on a problem practitioners will recognize instantly: firms don't agree on what "impact" even means.

The European Securities and Markets Authority said the new note guides market participants on its expectations for addressing greenwashing risks in sustainability-related claims, "with a particular focus on positive impact and climate transition-related claims." It creates no new regulatory obligations. But it tells fund managers and bond issuers exactly how supervisors will read their disclosures — and where the enforcement risk sits.

Where does this fit in ESMA's sequence?

This is the third installment in a series the regulator launched last year:

• July 2025: the initial note, covering references to ESG credentials — qualifications, labels, ratings and certificates.
• Early 2026: a second series on ESG integration and ESG exclusion funds.
• Now: impact and climate transition claims, the vaguest and most litigation-prone category of the three.

Every note in the series rests on the same four principles: claims must be Accurate, Accessible, Substantiated and Up to Date. That's the yardstick. Everything in the new note is an application of it.

What does ESMA say is going wrong on impact claims?

The regulator's supervisory observations read like a diagnostic. ESMA said observed practices indicated:

• confusion between investor impact and investee impact;
• claims made without a clear rationale linking the investment strategy to the intended positive impact;
• claims lacking sufficient substantiation.

Underneath all three sits one structural issue: market participants understand positive environmental or social impact differently and attach different levels of ambition to their impact claims. If the industry can't settle on a definition, the labels on the tin are doing work the strategy underneath can't support.

ESMA's fix is conceptual before it is procedural. Fund and bond providers should explain what difference they expect to make and how, drawing on Intentionality — the explicit aim to generate positive impact — and Additionality. The regulator warns that failure to distinguish clearly between investee impact and investor impact may itself result in misleading claims. That's a drafting-level instruction, not a general admonition.

Firms should also say how they'll measure results, through KPIs focused on outputs, outcomes, or impact.

What are the Do's and Don'ts?

The note includes concrete practice lists. For impact claims:

• Do clarify the environmental or social problems targeted, how the intended impact will be attained and measured, and be explicit on intentionality, additionality and measurability.
• Don't rely on exclusion-based screening or ESG risk-focused metrics as substitutes for impact criteria, or label products or underlying investments as "impact" solely due to asset class or sector.

That second Don't matters for anyone running a screening strategy and marketing it as impact. Exclusions tell you what a portfolio avoids; ESMA is saying avoidance is not impact.

For climate transition claims, the Do's include explaining the ambition and intended transition outcome — reducing portfolio emissions or achieving real-economy decarbonization — and describing the science-based scenarios, decarbonization pathways or other frameworks behind it. The Don'ts: relying solely on broad aspirational statements, using metrics or alignment claims without explaining their meaning, scope and limitations, and — the sharpest line in the note — presenting portfolio decarbonization targets in a way that suggests portfolio decarbonization equates to real-economy emissions reductions.

Why transition claims get separate treatment

ESMA's reasoning is structural. Transition claims are typically forward-looking, relating to the gradual improvement of the climate performance of companies, assets or activities — unlike claims based on current environmental characteristics. That forward orientation creates inherent uncertainty, because the claims rest on assumptions and external factors that evolve over time: technological progress, public policy developments.

So ESMA asks for clear communication on the transition ambition pursued — objectives, targets, metrics, and the extent to which the ambition contributes to headline climate objectives at EU or global level — plus the implementation strategy, action plan and progress achieved toward it.

What happens next

No new obligations, no deadlines — but this note effectively writes the checklist national competent authorities will use when they sample fund documentation. Firms with "impact" or "transition" in product names and marketing should audit those claims against the four principles now, before a supervisor does it for them.

By Elena Vasquez