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A fund can carry the word “sustainable” in its name, display an official label on its fact sheet, and still hold shares in companies actively drilling for new oil and gas. This is not a hypothetical scenario but a documented reality in the French market. It is precisely why the greenwashing alert is more critical than ever for investors who care where their money goes.
France has one of Europe’s most developed regulatory ecosystems for sustainable finance, encompassing the AMF’s ESG doctrine, the SFDR classification system, ESMA naming guidelines, and national labels like the ISR and Greenfin certifications.
Yet, the complexity of this ecosystem has created gaps that some asset managers are exploiting rather than closing.
This guide explains where the gaps lie, how the labelling framework operates, and what practical steps French investors can take to verify the credentials of their funds.
Why ESG Labels Are Not Enough: The Structural Problem in French Sustainable Finance
The assumption that a regulatory label guarantees genuine sustainability is one of the most persistent and costly misunderstandings in responsible investment.
In France, as elsewhere, the framework governing ESG fund names and disclosures was designed to protect investors. However, its architecture contains features that can dilute the very standards it was meant to enforce.
The Article 9 Retreat: When Standards Become Optional
Under the EU’s Sustainable Finance Disclosure Regulation (SFDR), the rulebook for sustainability disclosures, funds are classified into three tiers.
- Article 6 covers funds with no sustainability focus
- Article 8 applies to funds promoting environmental or social characteristics
- Article 9 is for funds with a dedicated sustainable investment objective, the highest standard available.
Between 2023 and 2024, assets in Article 9 funds fell by 24% across Europe. This was not because the funds suddenly became less sustainable. Instead, many asset managers reclassified them down to Article 8, a category with significantly lower requirements and reduced regulatory scrutiny.
The motivation was clear: Article 8 offers a wider compliance comfort zone and substantially reduces the risk of enforcement action. For investors who had chosen Article 9 funds believing they were the gold standard, this reclassification was a significant change with no fanfare.
The ESMA Naming Loophole: Transition Overrides Everything
In May 2024, the European Securities and Markets Authority (ESMA) published guidelines on how fund managers may use ESG or sustainability-related terms in fund names. The French regulator, the Autorité des Marchés Financiers (AMF), adopted these guidelines, with full application to existing funds, in 21 May 2025.
The guidelines introduced three broad naming categories, each with different exclusion thresholds. A closer look at these categories, however, reveals an important structural flaw.
Funds using “Environment” or “Impact” in their name must exclude companies deriving significant revenue from fossil fuels. Funds using “Sustainable” must meet the same exclusion criteria and commit to a defined proportion of sustainable investments. However, funds labelled “Transition” face markedly weaker requirements.
These funds primarily exclude only companies linked to controversial weapons, tobacco production, or violations of the UN Global Compact. Moreover, if a fund combines “transition” with a stricter term like “impact,” only the softer transition requirements apply.
This is a deliberate feature of the framework, creating a legal pathway for funds to use sustainability-adjacent language while maintaining fossil fuel exposure. As Reclaim Finance’s analysis of the new naming rules makes clear, this structure risks entrenching “transition-washing” rather than eliminating it.
Furthermore, some major asset managers responded to the new naming rules by renaming certain funds rather than reforming their investment processes to meet the underlying criteria. The label changes; the portfolio does not.
A Practical Greenwashing Verification Framework for French Investors
Given these structural weaknesses, relying on a fund’s name or SFDR classification alone is insufficient. Below is a layered verification process to look beyond surface indicators and examine what a fund actually holds.
Step One: Look at the Holdings, Not the Name
The most direct way to detect misleading environmental claims is to examine a fund’s portfolio composition. Most funds marketed in France must publish regular holdings reports, typically quarterly.
So, investors should search these documents for exposure to fossil fuel companies, particularly those involved in upstream exploration or new hydrocarbon development.
Research shows that approximately 70% of passive funds with sustainable claims hold companies involved in fossil fuel projects incompatible with limiting global warming to 1.5°C. A significant share of employee savings funds (PEE and PERCO products) also falls into this category, as documented in detailed market analyses.
Step Two: Understand Which Label the Fund Actually Holds
France has two nationally recognised voluntary labels for investment funds: the ISR label and the Greenfin label. These are distinct from SFDR classifications and carry different implications.
The ISR label, established in 2016, was significantly strengthened in March 2024 to exclude companies developing new hydrocarbon projects. This was a significant change, meaning a fund certified before this date may hold assets that would now disqualify it unless it has been re-audited.
The table below summarises the key differences between the main sustainability frameworks a French investor is likely to encounter.
| Framework / Label | Type | Fossil Fuel Exclusion? | Independent Audit? | Key Limitation |
|---|---|---|---|---|
| SFDR Article 8 | EU Regulatory Disclosure | No mandatory exclusion | No | Very broad; promotional use common |
| SFDR Article 9 | EU Regulatory Disclosure | No mandatory exclusion | No | Subject to downgrade; definitions vary |
| ESMA “Transition” Fund Name | EU Naming Guideline | No fossil fuel exclusion required | No | Overrides stricter naming criteria |
| ESMA “Environment/Impact” Name | EU Naming Guideline | Significant revenue threshold applies | No | Thresholds can still allow some exposure |
| ISR Label (post-March 2024) | French National Label | Yes (new hydrocarbon development) | Yes (COFRAC-accredited bodies) | Requires verification of re-certification date |
| Greenfin Label | French National Label | Yes (all fossil fuels) | Yes | Narrower universe of eligible funds |
Step Three: Apply These Verification Questions to Any Fund
Beyond classifications and labels, investors should put direct questions to their financial adviser or review fund documentation. This checklist targets the information gaps most commonly exploited in greenwashing:
- Check the exclusion policy: Does the fund explicitly exclude companies involved in new fossil fuel exploration, or only those in breach of international norms?
- Verify the ISR certification date: If the fund holds the ISR label, confirm it was re-certified after March 2024 under the updated criteria.
- Examine the fund’s SFDR history: Ask whether the fund was reclassified from Article 9 to Article 8 and request the rationale.
- Analyse engagement reporting: Genuine ESG funds should publish evidence of active shareholder engagement, such as voting records and dialogue with company management.
- Request the investment universe methodology: Funds claiming ESG integration should show that at least 20–30% of their original investment universe was excluded based on sustainability criteria.
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Legal Accountability Is Raising the Stakes for Greenwashing in France
The regulatory debate around ESG fund labelling is no longer purely administrative. In March 2024, the Paris Judicial Court ruled against TotalEnergies, finding that the company’s claims about its role in the energy transition were likely to mislead consumers.
The court ordered the company to remove specific sustainability statements or face daily financial penalties. As reported by ESG Today, this was the first time a major court had ruled a large oil and gas company’s net-zero narrative was misleading under French consumer protection law.
The case was brought by Friends of the Earth France and Greenpeace France, and the ruling has direct implications beyond the energy sector. If companies face legal liability for misleading corporate claims, the same logic applies with equal force to asset managers presenting fund strategies as green when their holdings tell a different story.
Additionally, a pending greenwashing complaint against BlackRock in France signals that regulators and advocacy groups are increasingly willing to target the investment management sector directly.
This confirms that the legal threshold for a misleading sustainability claim is tightening, and fund documentation is subject to the same scrutiny as any other consumer communication.
Staying Alert: Key Takeaways for Investors
The gap between what an ESG fund claims and what it delivers is a structural feature of the current market. Mechanisms from ESMA naming loopholes to the Article 9 reclassification wave enable asset managers to use sustainability-adjacent language while reducing their commitments.
At the same time, legal rulings and label reforms show the direction of travel is toward greater accountability, even if the pace is uneven. So, for any investor in France looking to align their savings with genuine environmental or social values, the following principles form a reliable starting point:
- Prioritise certified labels, specifically the post-March 2024 ISR and Greenfin labels, over SFDR classifications alone.
- Read the fund prospectus directly, with particular attention to the exclusion policy and the investment universe methodology.
- Track reclassification history, as a fund downgraded from Article 9 to Article 8 warrants scrutiny.
- Monitor engagement disclosures because genuine ESG commitment involves active ownership, not passive scoring.
- Reassess holdings periodically, since labels and portfolios change; a fund that passed a check in 2022 may not pass today.
Regulatory frameworks are evolving, and legal accountability is tightening. However, the burden of verification has not yet shifted fully onto the fund management industry. Until it does, a disciplined, evidence-based approach remains the most reliable way to ensure a sustainable investment is exactly that.
Watch this short video for a greenwashing alert on sustainability claims in investments.
Frequently Asked Questions
What are the potential consequences of relying only on fund labels for sustainability claims?
What key factors should French investors consider when evaluating a fund beyond its name?
How do recent legal rulings impact sustainability claims made by companies?
What steps can investors take to verify the credibility of a fund’s sustainability claims?
Why is it important for investors to stay updated on regulatory changes in sustainable finance?
