Key takeaways
In 2025, regulators across Europe are intensifying efforts to combat greenwashing in sustainable finance. What's being stepped up? New rules, clearer supervisory expectations, and expanded disclosure requirements are reshaping how financial institutions and corporates communicate ESG performance. With authorities like ESMA, the European Commission, and national regulators ramping up enforcement, the pressure to ensure credible, evidence-based sustainability claims has never been higher.
In this blog, we explore six key regulatory and market developments driving this ESG "greenwashing crackdown" — and what they mean for your compliance strategy.
Direct Anti-Greenwashing Rules
1. ESMA Steps Up: Greenwashing Supervision Becomes a Top Priority
The European Securities and Markets Authority (ESMA) announced that greenwashing is now a key supervisory priority for 2025–2026.
🔍 Highlights:
- Following ESMA’s Greenwashing Progress Report (2023), regulators are now shifting from diagnostic work to active supervision.
- ESMA will work with national competent authorities to harmonize anti-greenwashing enforcement and share tools, data, and best practices.
- Firms should expect more cross-border consistency checks, including website and fund document reviews.
💡 What you should do:
- Review ESG fund naming, disclosures, and marketing language to ensure they align with actual investment practices.
- Be prepared for regulatory requests to justify ESG claims with supporting evidence.
2. ESG Fund Names: Tightened Rules Go Live by May 2025
ESMA's fund naming guidelines, finalized in late 2024, introduce strict thresholds on when a fund can use terms like "ESG", "sustainable", or "impact".
🔐 Key requirements:
- 80% of investments must promote environmental or social characteristics (Article 8) or have a sustainable investment objective (Article 9).
- Funds with "sustainable" in the name must meet a minimum share of Taxonomy-aligned investments (exact % varies by member state guidance).
- Exclusion policies must apply to harmful sectors (e.g., fossil fuels, controversial weapons).
📅 Timeline:
- Applies to new funds as of Nov 2024.
- Applies to existing funds from May 2025.
Find the full checklist and guide on how to stay compliant with ESMA Funds' Naming here.
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3. EU ESG Ratings Regulation Takes Effect
On January 1, 2025, the EU ESG Ratings Regulation entered into force. Although it will apply from July 2, 2026, the impact is already being felt.
📊 Key features:
- ESG rating providers must be authorized and supervised by ESMA.
- Providers must disclose:
- Methodologies used
- Data sources
- Conflicts of interest
🎯 Impact on asset managers:
- Improved transparency and comparability of ESG ratings
- Increased scrutiny of how managers use third-party ESG data
Broader ESG Disclosure Reforms
4. CSRD Simplification: European Commission Proposes Major Reporting Relief
In February 2025, the European Commission proposed an "Omnibus Package" to ease the burden of the Corporate Sustainability Reporting Directive (CSRD).
📝 Key proposals:
- Delays to CSRD reporting deadlines for certain company groups (e.g., small EU subsidiaries of non-EU parent companies).
- Simplified standards for SMEs and non-EU companies.
- Reduction in mandatory ESG datapoints under the ESRS (European Sustainability Reporting Standards).
🎯 Why it matters:
- Companies will have more time to comply — but those that move early will benefit from stronger investor trust and SFDR alignment.
5. CS3D Postponed: Corporate Sustainability Due Diligence Directive Delayed to 2028
Also included in the Omnibus Package were updates to the long-anticipated Corporate Sustainability Due Diligence Directive (CS3D) — now pushed back.
⏳ New updates:
- The implementation deadline is now 2028, instead of 2026.
- Due diligence requirements may be streamlined, particularly for companies operating in complex global supply chains.
- Focus will shift to high-risk sectors and proportionate reporting duties.
💼 Implications:
- A longer runway for companies to build robust ESG risk frameworks — but expectations around human rights and climate diligence are still rising from investors and civil society.
Market Response & Strategic Shifts
6. Rising Demand for Sustainability Advisors
With regulations becoming more complex, financial institutions and corporates are turning to external sustainability consultants and ESG technology providers.
📈 Trends:
- Increased hiring of sustainability strategists, regulatory experts, and ESG data analysts
- Growth in demand for outsourced SFDR and CSRD reporting platforms
- Shift toward real-time ESG data tools to handle cross-border disclosures
Conclusion:
Greenwashing enforcement is no longer theoretical — it’s here. In 2025, financial institutions must treat ESG marketing and disclosures with the same precision and accountability as financial performance reporting. Sustainability claims must be accurate, verifiable, and backed by solid evidence.
Regulations will reshape the sustainable finance landscape — but they also provide an opportunity for firms to build deeper trust with investors and differentiate themselves through real transparency.
At Datia, we empower financial institutions with the raw ESG data, automated SFDR reporting tools, and greenwashing risk management solutions needed to stay ahead of regulatory demands.
