The latest EU Ecolabel draft proposals1 for the funds industry present stark differences in the criteria for qualifying equity and bond funds. While the EU has relaxed the criteria on Ecolabels for equity funds, its focus on green bonds as a primary vehicle for fixed income products is too narrow, in our view, and has the potential to create some unhealthy distortions when it comes to the allocation of capital that may in time undermine the goals of the initiative.