ESG Disclosures are ESMA's New Strategic Supervisory Priority
The EU's financial markets regulator and supervisor, the European Securities and Markets Authority (ESMA), is changing its Union Strategic Supervisory Priorities (USSPs) to include ESG disclosures along with market data quality.
ESG disclosures are now more important than costs and performance for retail investment products. This is a big step toward implementing the ESMA Strategy, which gives sustainable finance a major role.
ESMA and the National Competent Authorities (NCAs) want to keep up with the growing demand for financial products that are related to ESG. The organisations will ensure that ESG disclosures from key segments of the sustainable finance value chain, like issuers, investment managers, and investment firms, are clear and easy to understand. It will help stop greenwashing.
ESMA also wants to give ESG disclosures more attention over time by making sure they are correct and consistent. It also means building the skills of supervisors so that sustainable finance is fully integrated into their daily work and the way they think. So, ESMA and the NCAs will take steps to protect investors and make it easier for them to invest in a trustworthy ESG market.
ESMA has already made and used common methods and thematic reviews for the second USSP, which is about the quality of market data. Both ESMA and NCAs will keep doing more targeted and coordinated work to keep an eye on things.
Regarding costs and performance for retail investment products, ESMA and the NCAs carried out extensive actions, such as:
Common Supervisory Action (CSA) on costs and fees under the UCITS framework;
Mystery shopping exercise (with some NCAs);
Draft regulations and technical advice; and
Annual Statistical Report monitoring costs’ performance.
The USSPs are an important way for ESMA to work with NCAs to coordinate how they supervise certain topics. The goal is to devise a well-thought-out plan to deal with key market risks across the EU. NCAs are required to take these priorities into account when drawing up their work programmes.