EU markets regulator the European Securities and Markets Authority (ESMA) announced today that it has added ESG disclosures to its list of Union Strategic Supervisory Priorities (USSPs), one of its key tools to coordinate supervisory actions with national competent authorities (national-level regulatory authorities, or NCAs).
The regulator said that the move forms an important step in the implementation of its 2023-2028 strategy, which gives a prominent role to sustainable finance.
Earlier this year, ESMA released a sustainable finance roadmap, setting out its priority action and implementation areas to address the rapidly emerging and evolving sustainable finance market. Priority areas included addressing the risk of greenwashing, reviewing SFDR disclosure requirements, implementing requirements for the design of ESG investment products, and contributing to the development of sustainability reporting standards.
In a statement announcing the updated supervisory priorities, ESMA said that it and the NCAs “intend to accompany the growing demand for ESG-related financial products.” Regulators globally are moving to address issues associated with the proliferation of investment products and services marketed as ’ESG,’ ‘green’ or ‘sustainable,’ without clear rules communicating to investors the actual ESG-related attributes, methodologies and criteria that are being considered in the funds.
“We will foster transparency and comprehensibility of ESG disclosures across key segments of the sustainable finance value chain such as issuers, investment managers or investment firms and, hence tackle greenwashing.”
The regulator also stated that it will take active steps to protect investors and facilitate investments in a credible ESG market, including gradually increasing scrutiny on ESG disclosures, and “building supervisory capabilities to fully embed sustainable finance into daily supervisory work and supervisory culture.”