The European Securities and Markets Authority (ESMA) has set out plans to take environmental, social and governance (ESG) factors into account across the range of its core activities, including supervisory convergence and direct supervision.
In its ‘Strategy for Sustainable Finance’ published today (6 February), the regulator said among its key priorities for 2020 was completion of the regulatory framework on transparency obligations via the Disclosures Regulation, with ESMA set to work with the EBA and EIOPA to produce joint technical standards.
Under the proposed EU taxonomy regulation, ESMA will participate in the Sustainable Finance Platform.
ESMA chair Steven Maijoor said: “The financial markets are at a point of change with investor preferences shifting towards greenand socially responsible products, and with sustainability factors increasingly affecting the risks, returns and value of investments.”
Maijoor added that ESMA is in a “unique position” to support the growth of sustainable finance “while contributing to investor protection, orderly and stable financial markets”.
To address these challenges, ESMA said it will monitor and assess ESG-related market developments and monitor ESG-related risks, as well as include environmental-related systemic risk in its stress test scenarios.
The regulator committed to reporting on the trends, risks and vulnerabilities (TRV) of sustainable finance by including a dedicated chapter in its TRV report, including indicators related to green bonds and emission allowance trading.
It will also pursue convergence of national supervisory practices on ESG factors, with a focus on greenwashing and the prevention of mis-selling practices, and said it has already begun analysis of financial regulation to identify areas where the risk of ‘greenwashing’ might arise.
In its strategy, ESMA said it intends to ensure ESG guidelines are adhered to in the entities under its direct supervision, “while being ready to accept any new supervisory mandates related to sustainable finance”, such as in relation to the European Green Bonds Standards, for example.