The entry into force of the European Securities and Markets Authority guidelines for fund names has opened a new chapter in the regulation of sustainable investments. For the first time, there are concrete, EU-wide guidelines as to when a fund may use terms such as „sustainable“, „ESG“ or „climate“ in its name. If it says sustainable outside on the label, it should be sustainable on the inside. However, the reactions to the renaming in the fund industry show that it is not only clear regulation that is needed – but also backing from the public.

There is a growing number of media voices drawing sweeping conclusions about past greenwashing from the wave of name changes. Along the lines of: if terms are being deleted now, the fund was probably misleadingly labelled before. This is a generalised accusation of deception in the industry, where in many cases it is simply a matter of implementing new rules.

One example is an article by Correctiv with Finanztip, which infers widespread suspicion of misleading information from the withdrawal of ESG terms - without recognising the context of the new ESMA requirements, and their effects on previously regulatory strategies, in a nuanced manner.

What is being overlooked: The ESMA guidelines do not create an assessment of the past, but rather define new requirements – with quotas, exclusions and criteria that were not previously mandatory in this way. For example, they explicitly exclude certain fossil fuels or controversial weapons, which many established sustainable investment strategies have previously handled in a more differentiated way – for example through best-in-class approaches, SDG focus or social impact targets. ESMA, on the other hand, prioritises climate targets and specifies exclusion lists and minimum investment quotas that not every strategy can or wants to reflect.

The fact that fund providers are adapting their names in this environment is not an admission of past deception, but rather an expression of regulatory diligence: anyone with ESG in their title today must meet an objectifiable threshold. Many providers – especially in the ETF sector – prefer to dispense with ESG terms rather than change their entire methodology or index strategy. Others, in turn, tighten up their portfolios in order to retain the term. Both approaches are legitimate.

The changes at major fund providers such as DWS, Deka, Union Investment and Allianz GI are primarily reactions to the new requirements – not admissions of previous misleading behaviour. DWS was able to retain the ESG term in most funds as existing filters already met many of the requirements. Allianz GI only changed the names of 2% of its funds, mostly adapting the investment guidelines. Union Investment replaced „sustainability“ with „ESG“ in 10 of 13 funds, although the fund strategy remained largely the same. Deka changed numerous names, but left the content of its tried-and-tested strategies unchanged. This practice shows: The ESMA guidelines define new minimum standards for the future, not for the past. Anyone using them retrospectively as a benchmark is ignoring regulatory developments and the various adjustments made by many providers.

A fund is not automatically less sustainable just because it is labelled more neutrally – and was not necessarily more so before just because it had ESG in its title. All the more reason why differentiated analyses are now needed instead of moralising.

There is no doubt that greenwashing is a real risk. And this is where regulation must come in. But anyone who reflexively senses deception in the switch to new names is doing neither the cause nor the investors any favours. Quite the opposite: it weakens confidence in an industry that has already made considerable efforts in recent years to improve transparency, impact and investor information.

Sustainability deserves a critical debate. But it also deserves differentiation, context and fairness.