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ESMA responds to European Commission consultation on renewed sustainable finance strategy

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has submitted a response to the European Commission’s (EC) consultation on the renewed sustainable finance strategy. The response covers a broad range of topics from strengthening the foundations for sustainable finance, increasing opportunities for citizens, financial institutions and corporates to have a positive impact on sustainability, to managing and reducing risks relating to environmental, social and governance (ESG) factors.

In ESMA’s view, the future strategy on sustainable finance should aim to set up a robust and proportionate European regulatory framework that adequately supports the shift towards a more sustainable financial system. ESMA believes that facilitating access to sustainability data would constitute an essential contribution to putting sustainability at the forefront of the financial sector.

Steven Maijoor, Chair, said:

In setting the strategic direction to mainstream sustainable finance in the EU, ESMA sees three key areas for intervention: improving the accessibility and standardisation of sustainability data, ensuring effective regulation and supervision at EU level in emerging areas, such as green bonds and ESG ratings, and maintaining strong international coordination and cooperation.

ESMA will actively contribute to ensuring investor protection and stability of financial markets in the shift towards a more sustainable financial system.”

In its response to the consultation, ESMA focused on the following aspects:

  • ESG disclosures – currently there is a lack of a standardised disclosure regime for issuers relating to sustainability reporting. ESMA has brought this point to the EC’s attention in response to the NFRD consultation in June 2020, and notified its readiness to assist the EC regarding standard setting in this area;
  • ESG ratings – the lack of a legally binding definition and comparability among providers and no legal requirements to ensure transparency of underlying methodologies;
  • ESG benchmarks – the growing need in Europe for methodologically robust and reliable ESG benchmarks which encompass the entire ESG spectrum, including social and governance aspects;
  • EU green bonds – the establishment of supervision of third-party verifiers of green bond standards at the European level; and
  • Ecolabels for retail sustainable financial products – the effects of eco-labelling of products and whether broadening the scope of ecolabels to a wider range of financial products is necessary.

The Chairs of the European Supervisory Authorities (ESMA, the European Banking Authority and the European Insurance and Occupational Pensions Authority) have submitted a joint letter to the EC highlighting common main messages which are of particular importance for Europe’s strategy in the area of sustainable finance.

Compliments of the European Securities and Markets Authority.