SMFSC: ESG Fund Principles Need Deeper Implementation

The San Marino Financial Standard Council (SMFSC) has published its latest assessment of the implementation of its ‘Guiding Principles for ESG and Sustainable Investment Funds’, concluding that while progress has been made, further work is required to ensure the principles are fully and consistently embedded across the investment management sector.

The findings reflect SMFSC’s ongoing commitment to ensuring that the growing market for environmental, social and governance (ESG) investment operates with transparency, integrity, and measurable impact.

“Sustainable finance must be grounded in substance, not slogans,” the Council said.
“While many firms have made meaningful progress, there is still work to do to ensure ESG claims are accurate, evidence-based, and fully aligned with our principles.”

Progress Made, but Implementation Gaps Remain

SMFSC’s review found that most authorised fund managers have adopted ESG frameworks or reporting processes, yet the level of integration varies widely between firms.
Common challenges identified include:

• Inconsistent application of ESG metrics and performance indicators.
  
• Insufficient disclosure around how sustainability objectives are defined and monitored.
  
• Weak governance structures, particularly in smaller funds lacking dedicated ESG oversight.
  
• Limited verification of sustainability data provided to investors.
  

The Council noted that while firms generally support the Guiding Principles, many have yet to embed them into core risk management, product design, and compliance systems.

SMFSC’s Expectations for ESG Integration

In response to the findings, SMFSC has reaffirmed its expectation that firms must:

• Demonstrate clear linkage between stated ESG objectives and actual investment strategies.
  
• Disclose methodologies used to assess sustainability outcomes.
  
• Establish accountability structures at board and management levels for ESG commitments.
  
• Undergo regular independent reviews of ESG-related disclosures and marketing materials.
  

SMFSC will continue to monitor adherence to these expectations through supervisory engagement, thematic reviews, and dialogue with industry associations.

“Our role is to ensure that sustainable investment delivers real-world benefits,” the Council added.
“Credibility and consistency are essential if ESG finance is to retain public trust.”

Next Steps and Future Guidance

The Council announced plans to issue supplementary guidance in early 2026 to help firms strengthen governance, measurement, and reporting standards for ESG products.
This will include enhanced examples of good practice, improved definitions of material sustainability factors, and alignment with international frameworks such as the EU’s SFDR and ISSB standards.

SMFSC will also launch a series of workshops for fund managers and compliance officers, focusing on practical methods for integrating ESG criteria into investment decision-making.

Commitment to a Credible Sustainable Finance Framework

SMFSC reiterated that promoting credible sustainable investment remains a central priority in its broader mission to future-proof San Marino’s financial system.
The Council believes that by embedding its Guiding Principles fully and consistently, the industry can strengthen both investor confidence and long-term value creation.