Europe’s three primary financial regulatory agencies, the European Supervisory Authorities (ESAs), announced today that they will organise a public hearing on proposed environmental, social and governance (ESG) disclosure standards for financial market participants, advisers and products.
The regulators – The European Banking Authority (EBA), The European Insurance and Occupational Pensions Authority (EIOPA), and The European Securities and Markets Authority (ESMA) – are planning the public hearing as a follow-up to a consultation paper issued by the ESAs in April seeking input on the proposed ESG disclosure standards. The standards, developed under the EU Regulation on sustainability-related disclosures in the financial services sector (SFDR), have been designed with several goals in mind, including:
- Strengthening protection for end-investors;
- Improving the disclosures to investors from a broad range of financial market participants and financial advisers; and
- Improving the disclosures to investors regarding financial products.
As demand for ESG-themed investment products increases, and pressure builds on issuers to operate their businesses sustainably, ESG disclosure has come under growing scrutiny, as disclosure requirements vary by region and tend to be less formalized than financial disclosures.
The lack of disclosure standards can make it difficult for market participants, investors, advisors and customers to determine the true sustainability profile of the companies and asset managers that they interact with. As investors demand more sustainable accountability from companies, regulators such as the ESAs, and other third party organizations, including the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) are developing more stringent disclosure standards and standardized metrics for companies to follow.