Fund Managers Brace for Europe’s New Anti-Greenwashing Rules

Fund Managers Brace for Europe’s New Anti-Greenwashing Rules

Big fund managers are steeling themselves for a sweeping set of anti-greenwashing rules in Europe that could affect their operations globally when the rules begin to take effect in days.

Greenwashing is when a fund misleadingly labels itself as “eco” or “sustainable” to attract environmentally minded investors. Greenwashing claims exaggerate or misrepresent an investment's real environmental benefits—posing a thorn in the side of advocates of do-good, or sustainable, finance.

Rules that begin to take effect March 10 will require investment firms managing money in the European Union—many of which market funds that claim to focus on themes of environmental and social sustainability—to say whether they are reviewing the environmental and social impacts of their investments based on 18 metrics. The companies can also choose to explain why they aren't considering those impacts, which range from greenhouse-gas emissions to gender pay gaps.

By June 30, money managers with more than 500 employees will no longer have that choice: They must publish a statement saying that they are considering