Fewer Excuses, Higher Expectations: The New Reality of ESG Disclosure Enforcement

ESMA has confirmed greenwashing as a key supervisory priority for 2026–2028, with a specific report on greenwashing risk in the sustainable investment fund market planned for Q2 2026. Regulatory simplification — ESRS reduced, CSRD scope narrowed — has not moderated enforcement intensity. If anything, the opposite is occurring.

ESMA’s July 2025 thematic note established four principles for clear, fair and not misleading sustainability claims, covering both regulatory disclosures and non-regulatory communications: websites, fund factsheets, investor presentations. The Common Supervisory Action on SFDR compliance found satisfactory overall levels — but significant vulnerabilities, including inconsistent ESG terminology and Article 6 funds using sustainability-related names.

The central shift is from a regime focused on whether companies disclose ESG information to one focused on whether those disclosures are accurate, consistent and evidenced. Inconsistencies between annual reports, sustainability reports, investor presentations and websites are the primary trigger for supervisory attention.

ESMA is deploying natural language processing tools to check fund documentation against actual portfolio holdings — a signal that supervisory capacity is expanding beyond manual review. Cross-document consistency checking is becoming a standard supervisory technique, not a thematic exercise.

Operationally, this requires end-to-end internal controls equivalent to financial reporting, documented audit trails for every material ESG claim, cross-functional alignment between sustainability, finance, legal and investor relations teams, external assurance of key metrics, and net-zero commitments backed by interim milestones. Vague targets without methodology are increasingly treated as greenwashing risk.