The European Securities and Markets Authority’s (Esma) new ESG fund naming guidelines have led to rebranding, particularly among passive funds, though most strategies have remained intact, according to data provider Morningstar.
The findings are based on an analysis of 132 open-end and exchange-traded funds under the firm’s manager research coverage as of May 21, 2025, including 91 active and 41 passive strategies.
The new naming requirements, which came into force to tackle greenwashing and clarify ESG claims, prompted many funds to drop ESG-related terms from their names. However, analysts noted that these cosmetic changes hardly signalled a shift in strategy.
Ronald Van Genderen, senior analyst at Morningstar, commented that the regulations acknowledge “many shades of green,” and fund managers have indicated that even where ESG references were removed, the funds continue to follow sustainable investment strategies. “Investors should critically assess whether these strategies still align with their values, as names alone may no longer provide sufficient clarity,” he added.
Among actively managed funds that retained ESG references, roughly a third made changes to their ESG criteria. These changes involved the introduction of exclusions aligned with Climate Transition Benchmarks or Paris-Aligned Benchmarks, or adjustments to the minimum sustainable investment threshold. Despite these updates, Morningstar reported that they had limited impact on portfolios in most cases.
Passive funds saw more changes at the index level. For those that maintained ESG terminology in their names, shifts were mostly focused on index methodology rather than portfolio holdings. Only a small number of passive funds altered their actual holdings, and these were all funds that kept their names unchanged.
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Many of the name changes were implemented close to the May 21, 2025 deadline, noted Morningstar. Fund companies generally reported minimal impact on their processes or investment universes. However, the lack of current portfolio data means that investors may find it difficult to verify these claims independently, it shared.
Before Esma’s guidance took effect in November 2024, it was common for funds marketing ESG strategies to signal this directly in their names.
According to Morningstar Sustainalytics, at least 880 funds across Europe rebranded between May 2024 and May 2025. Passive funds accounted for a significant proportion of these changes, often either removing ESG references or replacing them with alternative labels.
While all funds included in Morningstar’s analysis reportedly maintained their ESG approach, the review found that a third of active funds experienced some impact on their investable universe. In most cases, though, this impact was described as limited, and there were few material shifts in holdings.
Four active funds reported a change in portfolio composition—two following the removal of ESG from their name and two that modified their ESG reference. An additional twelve active funds that made no name changes said there was some impact on their portfolio positioning, though it remained limited.
For passive strategies, changes in index methodology were more frequent among those that retained ESG in their names. No such changes were observed among passive funds that removed ESG references. Reported changes to holdings were scarce and confined to funds that made no alterations to their names.
Van Genderen shared that while fund companies report little disruption, the evolving nature of ESG regulation means that investors should remain alert. With limited transparency in the short term, closer scrutiny of fund holdings over the coming months will be essential.
