The Bermuda Monetary Authority has scaled back parts of its proposed sustainability disclosure regime after the industry raised concerns about overreach.

The changes follow a consultation launched in September 2025, which sought to introduce new requirements for sustainability-related disclosures and clamp down on misleading fund names that contribute to “greenwashing”.

While respondents broadly supported more transparency around environmental, social and governance claims, they warned that parts of the framework risked going too far — particularly in how “sustainable investing” was defined.

“The proposed definition could inadvertently capture funds that may consider [ESG] factors as part of their investment process,” stakeholders said, “but not in pursuance of any specified or disclosed sustainability objective or investment strategy”.

Industry participants also urged the Authority to avoid creating rules that would duplicate or diverge from international standards, arguing that this could undermine Bermuda’s competitiveness as a funds domicile.

In response, the BMA said it has revised its approach, moving away from prescriptive requirements towards a more flexible framework.

The Authority “will introduce principles-based, outcomes-focused requirements to ensure that investors have access to sustainability-related information that is fair, clear, not misleading and proportional”, it said.

The regulator has also removed its proposed definition of “sustainability” and is reviewing key terminology to make sure that only funds with clear sustainability goals fall within scope.

At the same time, the BMA confirmed it will keep its proposed prohibition on misleading fund names to prevent greenwashing.

For example, under the proposals a fund could not call itself “sustainable” unless sustainability was central to its investment strategy. Likewise, a fund that does not invest in insurance-linked securities, a key Bermuda market, would be prohibited from including “ILS” in its name.

Once finalised, the updated rules are expected to give funds six months to comply.