As ESMA’s Guidelines on funds’ names using ESG or sustainability-related terms becomes enforceable today, ARK Invest Europe has unveiled a new guide aimed at empowering Fund Selectors with practical strategies to navigate the rapidly evolving sustainable investment landscape in 2025.
The guide, titled “How to Navigate Sustainable Investing in 2025: Useful Tips for Fund Selectors,” offers Fund Selectors clear, actionable insights to enhance fund scrutiny, drive real accountability, and ensure authentic alignment with sustainability mandates.
“Sustainable investing is facing a critical credibility moment,” says 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.”
As sustainable investing regulations continue to tighten, Fund Selectors should examine what Fund Issuers are actually delivering in practice, the firm writes, adding that the guide provides actionable guidance for Fund Selectors and is broadly applicable across the sustainable investing landscape. Furthermore, it offers in-depth expertise on specific application to passive and actively managed funds.
The guide also highlights five key due diligence tips for navigating sustainable fund selection:
Verify the availability of methodologies – Request full transparency regarding 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 is a major red flag.
Ensure Methodologies are followed in practice – Go beyond documentation. As an acid test, one could choose five portfolio companies at random and request 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.
Assess Regulatory Preparedness – Select Fund Issuers who demonstrate a proactive, informed approach to evolving standards and who haven’t diluted their sustainability claims in response to regulatory scrutiny.
Evaluate Governance Integrity – Robust ESG governance, including independent oversight, is essential to avoid greenwashing and ensure that sustainability commitments are enforced in practice.
Scrutinise Impact Funds– Impact-labelled funds must 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.
Commenting on the launch of the guide, Kate Naumova, Associate Director – Sustainability at ARK Invest Europe and co-author of the guide, says: “We have leveraged our unique expertise in sustainable and thematic investing to support Fund Selectors in navigating today’s uncertain regulatory landscape. As one of very few ETF providers that did not re-categorise any of their Article 9 sustainable or impact ETFs during the introduction of SFDR Level II and did not remove “ESG” or “Sustainability”-related terms in 2025, we have a deep understanding of sustainable investing.
“In a market where many ETF providers rely heavily on third-party indices – often sacrificing transparency and thematic precision – we own the commercial rights to the indices used by our sustainable funds, maintaining a consistent approach to methodological transparency and integration.
“We believe that as sustainable investing regulations continue to tighten, Fund Selectors must now examine what Fund Issuers are actually delivering in practice.”
