ESMA Targets to Crack Down on Greenwashing in New Sustainable Finance Roadmap

Published on: 14 February 2022 06:30 PM
by KnowESG

A Brief Summary

The European Securities and Markets Authority (ESMA) released a report which sets out a planned sustainable finance work for the next three years. The ESMA's primary goal is to address the rapidly emerging and evolving sustainable finance market, a crackdown on greenwashing and promoting transparency.

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As major global economies seek to transition to a low-carbon, sustainable economy, financial markets have emerged as a key player in promoting and supporting the large capital flows and investments required to make this transition possible. As investors and financiers increasingly channel capital to participate in the opportunities created by these disruptive forces and new investment products become available, the sustainable finance market has grown and evolved quickly, challenging regulators to fulfil their roles of protecting investors and maintaining market stability.

Greenwashing is a top priority area for the ESMA, which says that greenwashing is either intentional or unintentional owing to regulatory differences or poor data quality. The new roadmap introduces comes in handy and helps find common EU-wide solutions for greenwashing.

The roadmap includes other priorities as well, including building capacities in sustainable finance for ESMA, monitoring and assessing risks associated with ESG markets, providing finance training programs for ESMA and NCA staff, drafting climate scenario analysis and stress testing etc.

The roadmap entails a broad range of action areas right from reviewing SFDR disclosure requirements, implementing requirements for the design of ESG investment products and contributing to the development of sustainability reporting standards for issuers to enhancing the comparability and reliability of ESG ratings and monitoring carbon markets.