From time to time, legislative initiatives arise that do have an impact on the financial sector, but do not always feature within regular regulatory change processes.
For example, I once experienced first-hand the disruption within a financial institution caused by an unnoticed amendment to the Opium Act, which resulted in an unplanned implementation trajectory for the Customer Due Diligence policy.
In this article, I discuss three legislative developments related to the E, S or G of ESG that financial institutions should have on their radar, but which are easily overlooked—either because they are not financial legislation, or because they do contain relevant requirements, but these are embedded in regulation that at first glance does not seem relevant:
Directive (EU) 2024/825 (hereinafter: “the Directive on better sustainability information for consumers”) aims to strengthen the position of consumers in the green transition by ensuring better (product) information and providing additional protection against unfair commercial practices. Examples of such practices include greenwashing and misleading claims about products that, for instance, do not last as long as consumers may reasonably expect.
It is important to emphasise that this directive concerns better sustainability information towards consumers and should not be confused with the EU Green Claims Directive. That separate legislative initiative specifically concerns the use of environmental claims and their scientific substantiation, verification and validation, but is currently in a phase of political deadlock and has not yet been finalised.
The Directive on better sustainability information for consumers will be implemented in the Netherlands in Book 6 of the Dutch Civil Code and will apply from 27 September 2026. Among other things, the directive imposes stricter requirements on the use of generic environmental claims (such as “green”, “sustainable” or “responsible”), on the use of labels, and on information about the environmental performance of products.
The Directive is not limited to environmental claims, but has a broader scope: in addition to environmental claims, it also covers social claims, information on product durability, repairability, labels and circularity.
These requirements apply across sectors and are therefore also relevant to financial institutions when making sustainability claims towards consumers, for example in relation to, sustainable investment funds, ESG portfolios, sustainable insurance products
But didn’t this already exist? The answer is: yes, yes—and no.
Yes, the AFM Guideline on Sustainability Claims of October 2023 (recently reaffirmed in an ESG update) applies three core criteria to sustainability claims:
This guideline is based on Article 4:19(2) of the Financial Supervision Act and Article 48 of the Pensions Act, which require information to be correct, clear and not misleading. The connection with the Directive on better sustainability information for consumers is therefore easily made.
In extension of this, reference can also be made to the Final Report on Greenwashing published in June 2024 by the European Supervisory Authorities (ESAs), which further clarifies the AFM’s approach at European level.
And then—although specifically aimed at fund managers, yet still relevant for the financial sector as a whole—the guidelines on the naming of funds using ESG or sustainability-related terms, published in August 2024.
These guidelines clarify when the use of ESG or sustainability terminology in fund names is unfair, unclear or misleading; the name of a fund is a strong marketing tool, often the first piece of information investors see, and therefore has significant influence on their investment decisions.
So this is old news, you might think.
Unfortunately, that conclusion is premature. The Directive on better sustainability information for consumers adds twelve specific commercial practices to the Unfair Commercial Practices Directive. This expands the so-called “black list”. Practices on the black list are always prohibited. No discussion.
What has been added to this black list that is relevant for the financial sector? Our top three:
One of the newly added practices concerns making a generic environmental claim without it being based on recognised environmental performance relevant to that claim. The use of terms such as “green”, “ecological”, or “energy efficient” may suggest ‘excellent environmental performance’ and must therefore be substantiated.
It is also not permitted to make an environmental claim about an entire product if in reality it only relates to one specific aspect.
In addition, generic claims such as “conscious”, “sustainable” or “responsible” are no longer permitted when they are solely based on recognised excellent environmental performance. Such claims do not only relate to environmental characteristics, but also create expectations regarding other aspects, such as social characteristics.
Wondering why the word “excellent” appears here for the second time? That is not my choice. The concept of “excellent environmental performance” appears no fewer than ten times in the directive, always in exactly that combination. No pressure.
Under the Directive on better sustainability information for consumers, it will be prohibited to use a sustainability label that is not based on a recognised certification scheme or is not established by a public authority.
A certification scheme is defined in the directive as a third-party verification scheme. This certifies that a product, process or business activity meets certain requirements in order to qualify for use as a sustainability label. Such a scheme must meet four cumulative conditions:
The definition of a sustainability label is broadly formulated:
“a voluntary public or private trust mark, quality label or similar sign that aims to promote or highlight a product, process or business activity due to environmental or social characteristics”
It is defensible – and even likely – that an ESG score developed by a fund manager qualifies as a “sustainability label”. This means that such a score may no longer be used in marketing and communication towards retail clients from 27 September 2026, unless the score is based on independent certification or has been established by a public authority.
Relation to the ESG Rating Regulation
In this context, Regulation (EU) 2024/3005 (hereinafter: the “ESG Rating Regulation”) should also not be overlooked. This regulation requires ESG rating providers to obtain an ESMA licence as of 2 July 2026. Its aim is to increase transparency, improve data quality and introduce governance requirements for ESG rating providers.
Although the regulation provides for an exemption from this licence for financial institutions that are already supervised – for example under SFDR – this exemption is not unlimited. If a financial institution provides its ESG ratings to third parties (including clients), that information must comply with the minimum disclosure requirements that also apply to authorised ESG rating providers under Article 49 of the ESG Rating Regulation.
Further details will be established by the ESAs in a delegated regulation, which will also align with the information disclosed by financial market participants under Article 10 SFDR. As Article 49 of the ESG Rating Regulation does not contain an explicit hyperlink requirement, it follows from the recitals that the legislator intends investors to be able to access the required information via references to website disclosures. This approach is being technically elaborated by the ESAs but has not yet been formally adopted.
Claims about future performance may only be made if they are substantiated by clear, objective and verifiable commitments and targets. These must be publicly accessible and laid down in a concrete, detailed and realistic plan demonstrating how and within what timeframe the commitments and targets will be achieved.
In addition, such environmental claims must be assessed by an external expert. This expert must be independent from the party making the claim, there must be no conflicts of interest, and the expert must have demonstrable knowledge and experience in environmental matters. It must also be ensured that progress against the commitments and targets can be periodically monitored.
If you are still not convinced of the relevance, below are a few illustrative examples of claims that can be found in similar wording on websites aimed at retail clients, but which we believe warrant reconsideration:
• “Our company commits to reducing CO₂ emissions by 2030”;
• “Our responsible investment policy has the following environmental characteristics”;
• “We assess our investments using our own internal ESG score”;
• “Our fund is a sustainable fund by investing in companies with an ecological objective”.
Do one or more of these examples sound familiar? Our advice: engage in a timely discussion with your marketing and legal departments. The period of informal ESG marketing had already come to an end, but from the end of September 2026 this will become a material risk. From that moment, the AFM will have more concrete tools to assess sustainability claims by financial institutions and will be in a stronger legal position to take action against misleading practices.
Bonus tip: when speaking with marketing, also include your digital footprint as a point of attention.
Directive (EU) 2023/970 (hereinafter: the “Pay Transparency Directive”) aims to create transparency and enforceability around remuneration. The directive has been in force since June 2023 and must be transposed into national legislation by Member States. In the Netherlands, this is done through the Implementation Act on Pay Transparency between Men and Women (hereinafter: the “Act”), with an intended entry into force of 1 January 2027 (a delay compared to the EU deadline of 7 June 2026). We consider this topic part of the social pillar of ESG.
Here too, you may question its relevance. After all, remuneration within the financial sector is already tightly regulated. And in the context of ‘hidden’ regulation, which we will not elaborate on here, reference can be made to a recently adopted amendment to the Cash Payments Act, which also includes a change to the bonus cap.
Nevertheless, the Act introduces a number of new obligations that will apply to all employers. As discussed in a previous article, employers must make the criteria for remuneration and pay progression easily accessible to their employees, employees have the right to request written information about their own pay level and the average pay levels (by gender) for employees performing the same or work of equal value, and employers must inform employees annually of this right and explain how they can exercise it.
In addition, a reporting obligation applies from 100 employees onwards. And last but not least, sanctions for non-compliance: both administrative (fines of up to €10,300, publicly disclosed by the Labour Inspectorate and potentially increased by 100% in case of repeated violations) and civil (for example compensation, back pay including interest and variable remuneration).
One of the most significant civil law innovations is the reversal of the burden of proof for the employer. An employee only needs to establish a presumption that a pay difference exists, or that transparency obligations have been breached. The employer must then prove that no discrimination has taken place and that any differences are objectively justified.
An example of how this may become relevant for an investment firm after 1 January 2027: a female investment manager requests, on 2 January 2027, information about her own salary and the average salary of colleagues performing equivalent work, broken down by gender. It appears that since joining in 2018, she has earned €8,000 less per year in fixed salary than her male colleagues; she also receives structurally lower variable pay, pension contributions, a lower lease car allowance, and the investment firm cannot objectively justify these differences.
But the Act only applies from 1 January 2027 and formally has no retroactive effect, correct? Agreed—but take note. In our example, the employee can only bring a claim based on the Act once transparency reveals the issue; due to the lack of transparency, she would (generally) not have been aware of these differences earlier. This does not change the fact that the pay discrimination started in 2018, the date on which she joined the firm.
Even before this Act came into force, provisions such as Article 7:646 of the Dutch Civil Code already prohibited discrimination based on gender in employment conditions, as did the Equal Treatment Act.
This means that an unjustified pay difference is, or may be, a continuing unlawful situation from the moment it arises.
So, if it can be established that an investment firm has been paying two equivalent roles differently since 2018 without objective justification, this has already been unlawful since 2018.
In short, this cannot be avoided: an evaluation of recruitment processes and remuneration structures is the absolute minimum on the to-do list.
All in all, a great deal of information. If you find it difficult to navigate, we would be happy to think along with you.
