ESMA calls for sustainability disclosures for all financial products
EU Taxonomy should be sole reference point for assessment of sustainability
All financial products should disclose some minimum basic sustainability information, covering environmental and social characteristics, according to the European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor. It also recommended that the EU Taxonomy should become the sole common reference point for the assessment of sustainability and should be embedded in all sustainable finance legislation.
In a published Opinion on the Sustainable Finance Regulatory Framework, ESMA acknowledges that the EU Sustainable Finance Framework is already well developed and includes safeguards against greenwashing, but sets out possible long-term improvements.
ESMA said it considers that, in the longer term, the Framework could further evolve to facilitate investors’ access to sustainable investments and support the effective functioning of the sustainable investment value chain.
In its opinion, ESMA said the EU Taxonomy should be completed for all activities that can substantially contribute to environmental sustainability and a social taxonomy developed. In addition, a definition of transition investments should be incorporated into the Framework to provide legal clarity and support the creation of transition-related products.
ESMA also recommended that ESG data products should be brought into the regulatory perimeter. “The entry into force of the ESG Ratings Regulation (‘ESGR’) is expected to improve the reliability of ESG ratings and enhance transparency around them. The upcoming ESGR, however, focuses on the more limited scope of ESG ratings,” said ESMA.
It added: “ESMA is of the view that it is equally important to bring ESG data products into the regulatory perimeter to ensure that ESG data is reliable and comparable. ESMA believes that the Commission should consider addressing ESG data issues in a holistic way to establish a regulatory regime that would provide a robust basis for the quality and reliability of ESG data products.”
