Ahead of new ESMA guidelines, BlackRock enhances sustainability characteristics for a major portion of its investment funds, affecting over $185B in assets.

Adjusting to Stricter ESG Regulations

Global asset manager BlackRock has announced a significant overhaul of its sustainable fund lineup in response to new European Securities and Markets Authority (ESMA) rules on ESG fund naming. The changes affect 135 funds with a combined $185 billion in assets, including $92 billion in funds that will see an enhanced sustainability focus.

BlackRock, which manages over $1 trillion in sustainable and transition assets, stated that while some funds will strengthen their ESG commitments, others will drop sustainability-related names but maintain their investment strategies.

Why These Changes Matter

The new ESMA guidelines, effective May 21, 2025, aim to combat greenwashing by enforcing stricter investment thresholds for funds using ESG, green, or sustainability-related terms. The key requirements include:

80% of assets must align with the fund’s stated sustainability objectives
Strict exclusion criteria for companies heavily involved in fossil fuels, tobacco, or controversial weapons
Introduction of a new “transition” category for funds focused on gradual environmental improvements

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How BlackRock’s Funds Are Changing

60 funds ($92B AUM) will strengthen sustainability criteria, with some adding Paris Aligned Benchmark (PAB) exclusions
18 funds ($42B AUM) will adopt transition-related terms or adjust strategies for transition investing
56 funds ($51B AUM) will remove sustainability-related terms from their names, though investment strategies remain unchanged
One fund will be downgraded from SFDR Article 8 to Article 6, while all other Article 8 and 9 funds will keep their classifications

BlackRock made these adjustments following consultations with key clients, distributors, and portfolio managers.

Implications for Investors

A recent study suggests that up to two-thirds of ESG-labeled funds in the EU may need to sell assets or change names to comply with the new rules. BlackRock’s proactive stance could set a precedent for other asset managers navigating the evolving regulatory landscape.

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