By Carly Phillips-Jones
The European Securities and Markets Authority (ESMA) has published a speech given by Natasha Cazenave, ESMA Executive Director, setting out key priorities for the asset management industry in 2022, largely focused on sustainable finance and systemic risk.
In the speech, ESMA acknowledged that demand for ESG products remains strong, with many investors increasing their allocation to sustainable investment products and vehicles. It noted that the disclosure requirements within the European sustainable finance disclosure regulation (SFDR) that have been in place since March 2021, were designed to enhance investor confidence and further support market growth. ESMA welcomed the significant efforts made by market participants to prepare for the implementing measures of the SFDR which will apply from 1 January 2023 and stated that it will continue to discuss the development of disclosure requirements with the European national authorities.
Beyond the implementing measures under SFDR, the European supervisory authorities are also preparing to review the indicators for principal adverse impacts, a key part of the SFDR disclosures. The objective of such review is to ensure the indicators stay relevant in light of key environmental and scientific developments. One of the most important developments is that fund managers and investors are increasingly treating the disclosures categories as product classification, for example by marketing themselves as either Article 8 or Article 9 SFDR. As a consequence, Article 8 products (also called "light-green" products) have been called out for having less ambitious environmental or social characteristics. ESMA must consider appropriate criteria to ensure that investors who are looking for sustainability features are offered financial products matching their preferences. ESMA will be providing technical advice to the European Commission on future initiatives in this area as well as publishing guidance on a number of stakeholder questions on this topic.
In relation to the taxonomy regulation, ESMA noted that European supervisory authorities intend to play an active part in ensuring that taxonomy related disclosures are relevant for investors and valuable for the market. It acknowledged that the framework is still in the making and the taxonomy is continuing to evolve, therefore, ESMA is working to provide practical guidance wherever possible.
ESMA stresses that it welcomes feedback and input from stakeholders as it seeks to calibrate the sustainability disclosure framework appropriately. It also emphasises the important role that fund managers are playing in financing the climate transition and it emphasised the vigilance required to reduce the risk of greenwashing and preserve investor trust in capital markets.