“Global ESG fund rebranding efforts have cost the industry an estimated €2 billion — and counting.” — Morningstar, 2025.
The European Securities and Markets Authority (ESMA) introduced new fund naming rules with a clear ambition: increase transparency, enhance investor protection, and combat greenwashing. These are important and worthwhile goals. But in execution, the rules risk undermining the very trust they were meant to restore by placing too much weight on labels and too little on investment substance.
ESMA’s guidelines now require that funds using descriptors like “sustainable,” “green,” or “impact” demonstrate that at least 80% of their holdings align with defined ESG characteristics. In principle, this raises the bar. In practice, it has pushed many funds into rebranding — not due to a shift in investment approach, but to avoid falling afoul of prescriptive thresholds. At Osmosis, for example, while our investment philosophy remains unchanged, several of our fund names have been updated to remain compliant under the new standards.
Labels Alone Don’t Tell the Story
Sustainable investing should be judged on the basis of evidence: Is there a clear, verifiable methodology? Is impact measured, monitored, and reported transparently? These are the questions that matter. Simply meeting an 80% label threshold says little about whether a fund is enabling the low-carbon transition or meaningfully contributing to environmental objectives.
In fact, by equating sustainability with rigid binary rules, ESMA’s framework may disqualify strategies that incentivise real-world change — particularly those investing in transition leaders or resource-efficient companies not yet classified as “green.” In our view, the rules risk slowing progress rather than accelerating it.
The Legal Industry’s Windfall
While investors grapple with the implications, one sector is thriving: legal services. Asset managers are increasingly dependent on ESG-focused legal counsel to interpret overlapping frameworks like SFDR, the EU Taxonomy, and ESMA’s guidelines.
Hourly rates for top-tier ESG lawyers range from €600 to €1,200. Full-scale rebranding projects can cost tens of thousands per fund, not including the ongoing legal retainers for compliance reviews. These costs inevitably flow downstream, resulting in higher fund fees and eating into investor returns.
In short, while transparency improves on paper, the financial winners of ESMA’s regulation are legal firms — not the investors it was designed to protect.
Looking Ahead: Striking the Right Balance
At Osmosis, we believe that effective sustainable investment strategies require both regulatory alignment and pragmatic flexibility. Institutional investors deserve frameworks that facilitate – not frustrate – the transition to a low-carbon economy.
For more information on Osmosis’s fund name changes please refer to our website. Feel free to get in contact directly if you have any further questions.
Important Information
This document was prepared and issued by Osmosis Investment Research Solutions Limited (“OIRS”). OIRS is an affiliate of Osmosis Investment Management US LLC (regulated in the US by the SEC) and Osmosis Investment Management UK Limited (regulated in the UK by the FCA). OIRS and these affiliated companies are wholly owned by Osmosis (Holdings) Limited (“Osmosis”), a UK-based financial services group. Osmosis has been operating its Model of Resource Efficiency since 2011.