The unique market for investment funds remains fragmented, and greenwashing persists, shows the ESMA report.

National differences in the marketing rules of investment funds and the misleading use of ESG messages continue to fragment the single capital market, despite the common European framework, according to a report by the European Securities and Markets Authority.

The single market for investment funds remains fragmented, and greenwashing persists, the ESMA report shows.

European rules intended to facilitate the cross-border distribution of investment funds have not led to uniform application in member states, and greenwashing remains the main source of problems in communication to investors, according to a report published by the European Securities and Markets Authority.

In short

1. National requirements regarding the marketing of funds differ significantly between member states.

2. Most authorities check marketing materials only after publication.

3. ESG claims represent the most frequent source of non-compliance.

4. The cross-border market is dominated by a few financial jurisdictions.

5. Retail investors are the most exposed to misleading information risks.

The ESMA report shows that, despite the existence of a common European framework for the cross-border distribution of investment funds, the application of marketing rules remains deeply marked by national differences. Although EU legislation establishes general principles for commercial communications, member states continue to impose distinct requirements regarding the languages used, the wording of risk warnings, and the additional conditions applicable to funds addressed to retail investors. In practice, these differences mean that effective access to the single market continues to depend on the destination jurisdiction, limiting the truly unified nature of cross-border distribution.

Regarding supervision, ESMA finds that most competent national authorities analyze marketing materials only after they have been published and made available to investors. Only a small number of member states systematically apply ex-ante checks. This approach allows marketing messages to reach the public before any non-compliance can be identified and corrected, transferring a significant part of the informational risk to investors.

In this context, the ESMA report identifies the use of messages related to environmental, social, and governance issues as the most frequent source of interventions by supervisory authorities, signaling persistent risks of misleading presentation of fund characteristics in marketing materials.

The analyzed data also show that cross-border marketing activity is concentrated in a limited number of member states. Luxembourg and Ireland generate the majority of outbound notifications, while Germany, France, Italy, and Spain emerge as the main destination markets. This concentration accentuates the influence of national practices on the functioning of the single market and amplifies the effects of fragmentation identified by the report.

ESMA also highlights that many of the identified problems particularly affect retail investors, who rely significantly on marketing materials when making investment decisions. Exaggerated claims about ESG benefits, combined with less visible or harder-to-understand risk warnings, create an informational imbalance that undermines the investor protection objectives pursued by the European framework.

The ESMA report evaluates the application of the European framework introduced to reduce barriers to cross-border distribution of funds. The main conclusion is that legislative harmonization has not been sufficient to standardize supervisory and marketing practices. In the absence of stricter operational standards and more frequent preventive checks, market fragmentation and the risk of greenwashing remain structural characteristics of the single capital market.

How greenwashing manifests in practice, according to ESMA

According to the ESMA report, greenwashing in investment fund marketing does not usually occur in the form of explicitly false claims, but through selective, incomplete, or unbalanced presentations of product characteristics.

In practice, national authorities have identified situations where funds without clearly defined sustainability objectives are promoted using terms like "green," "responsible," or "sustainable," without these claims being supported by the investment strategy or the fund's legal documents. Other cases involve discrepancies between prospectuses, essential information documents, and marketing materials, creating a more favorable image than that resulting from the official documentation.

ESMA also shows that greenwashing frequently manifests through the emphasis on ESG benefits in promotional materials, while risks or limitations are presented less visibly or in hard-to-understand language. This practice can mislead investors about the true nature of the product and its risk profile.

This problem is amplified by the predominant ex-post supervision model identified by ESMA, in which corrections are requested after marketing messages have already reached the public. In the absence of more frequent preventive checks and common operational standards, the risk of greenwashing remains structural in the single market for investment funds.

https://2eu.brussels/ro/stiri/piata-unica-a-fondurilor-de-investitii-ramane-fragmentata-iar-greenwashing-ul-persista-arata-raportul-esma