With ESMA’s guidelines on fund names using ESG or sustainability-related terms becoming enforceable, ARK Invest Europe has launched a guide to empower fund selectors with practical strategies to navigate the rapidly evolving sustainable investment landscape in 2025.
The guide – How to Navigate Sustainable Investing in 2025: Useful Tips for Fund Selectors – is designed to offer fund selectors clear, actionable insights to enhance fund scrutiny, drive accountability and ensure authentic alignment with sustainability mandates.
“Sustainable investing is facing a critical credibility moment,” said Stuart Forbes, head of ARK Invest Europe and co-author of the guide. “With the shifting policy landscape and increasing investor scepticism, fund selectors now serve as the gatekeepers of truth. They must look beyond marketing labels to ensure that funds genuinely contribute to sustainable outcomes.”
Due diligence tips
As sustainable investing regulations continue to tighten, the guide offers five ‘tips’ for how fund selectors should examine what fund issuers are delivering in practice, broadly applicable across the sustainable investing landscape.
First, fund selectors are encouraged to request and verify the availability of fund methodologies. This includes understanding how companies are scored, selected and weighted for sustainability, and critically, how sustainable investment proportions genuinely link to real-world economic activities, not misleading metrics. Lack of detailed information should be considered a major red flag.
Fund selectors should also go beyond documentation to ensure methodologies are followed in practice. As an acid test, the guide suggests choosing five portfolio companies at random and requesting evidence of the applied approach. This could include a one-page scorecard for each, detailing how each company has been surfaced, scored, selected and weighted by the fund in accordance with the stated methodology, including any impact scores.
Impact-labelled funds were specifically identified as needing to be held to the highest standards, with a transparent link between forward-looking assessments and backward-looking impact reporting. Outsourcing this reporting without integration raises questions about the strategy’s credibility, the guide said.
Fund issuers should also be able to demonstrate a proactive, informed approach to evolving standards, while robust ESG governance, including independent oversight, is considered essential to avoid greenwashing and ensure that sustainability commitments are enforced in practice.
