The EU Markets regulator, European Securities and Markets Authority (ESMA), announced its Strategy on Sustainable Finance. The strategy reveals sustainability as the main goal for ESMA and sets out a plan to implement Environmental, Social, and Governance (ESG) factors in its work.
The strategy reveals that the fundamental priorities of ESMA include transparency obligations, risk analysis on green bonds, ESG investing, convergence of national supervisory practices on ESG factors, taxonomy, and supervision.
Steven Maijoor, Chair, said:
Steven Maijoor, ESMA Chair Source: esma.europa.eu
The financial markets are at a point of change with investor preferences shifting towards green and socially responsible products, and with sustainability factors increasingly affecting the risks, returns and value of investments. ESMA, with its overview of the entire investment chain, is in a unique position to support the growth of sustainable finance while contributing to investor protection, orderly and stable financial markets.
The strategy highlights ESMA’s primary goals:
- Finalising the regulatory infrastructure on transparency obligations through the Disclosures Regulation. ESMA will collaborate with the European Banking Authority (EBA) and European Insurance and Occupational Pensions Authority (EIOPA) to produce collective technical standards;
- Introducing a dedicated chapter on sustainable finance in its trends, risks and vulnerabilities (TRV) and adding indicators related to green bonds, Environmental, social and corporate governance (ESG) investing, and emission allowance trading;
Analysing financial risks from climate change and potentially climate-related stress testing in different market segments; - Adopting national supervisory practices on ESG factors, alleviating risk of greenwashing, preventing mis-selling practices, and promoting transparency and reliability in the reporting of non-financial information;
- Taking part in the EU Platform on Sustainable Finance set out to develop and maintain the EU taxonomy and monitor capital flows to sustainable finance;
- Establishing and safeguarding adherence to ESG guidelines among the ESMA supervised entities.
ESMA has already made progress on several points of the EU’s action plan on financing sustainable growth. The agency will continue to aid EU institutions to achieve sustainable finance goals and provide advice on areas where new Level 1 and Level 2 measures may be necessary.
Last year, to help execute its strategy, the authority set up Coordination Network on Sustainability composed of experts from national competent authorities and ESMA staff. The agency will establish in the coming months a consultative working body of stakeholders to support the network.
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