The Sustainable Finance Roadmap 2022-2024 (Roadmap) has been published by the European Securities and Markets Authority (ESMA), the EU’s securities markets regulator. The ESMA points out three priorities for its sustainable finance work:

  • Building National Competent Authorities’ (NCAs) and ESMA’s capacities in the sustainable finance field;
  • Tackling greenwashing and promoting transparency; and
  • Monitoring, assessing and analysing ESG markets and risks.

ESMA is actively working on the development of the sustainable finance rulebook and to its reliable application and controls by taking the required steps to promote investor protection within the EU. ESMA also analyses risk assessment and market monitoring activities in particular to potential financial stability threats stemming from ESG factors.

The Roadmap highlights ESMA’s deliverables on sustainable finance and their implemntation over the next three years through advancing on ESMA’s 2020 Strategy on Sustainable Finance. The Roadmap will serve as a logical tool to ensure that ESMA satisfies the vast array of sustainable finance tasks across several sectors in a coordinated way.

Verena Ross, Chair, said:

“Advancing the sustainability agenda is crucial for ESMA, particularly as investor preferences shift to environmentally friendly financial products and the European Union strives to meet its commitments on tackling climate change.”

“The Roadmap is a milestone for our sustainable finance work, identifying the priority work we will do to ensure that ESMA and national supervisors take ambitious action on priority sustainable finance issues.”

“I am confident that ESMA’s actions will play a key role in contributing to the European Green Deal and in protecting European investors on this journey.”

Roadmap Priorities

The Roadmap sets three priorities for ESMA’s sustainable finance activities in the period from 2022 to 2024:

Building NCAs’ and ESMA’s capacities: the growing importance of sustainable finance demands NCAs and ESMA to additionally develop skills beyond their traditional areas of expertise to comprehend and address the overlooked implications of new regulation and of innovative sector based market practices. ESMA will assist create its, and NCAs’, capacity on sustainable finance through a multi-year training programme and facilitating the active sharing of supervisory experiences among NCAs. These endevaours will also add to creating operative and frequent supervision in sustainable finance;

Tackling greenwashing and promoting transparency: the blend of upwards demands for ESG investments and rapidly evolving markets means room for greenwashing. Greenwashing is a multifaceted issue needing various forms, has different causes and potential to adversely affect investors looking to make sustainable investments. Examining this issue, defining its fundamental features and addressing it with coordinated action across multiple sectors, identifying common solutions throughout the EU, will be essential to safeguarding investors;

Monitoring, assessing and analysing ESG markets and risks: the aim is to recognise fast-frowing trends, risks and weaknesses likely to have a high impact on investor protection and on financial markets stability. ESMA will influence on its data-analysis capabilities to support its, and NCAs’, supervisory work and to encourage a convergent approach throughout NCAs. ESMA will conduct specific tasks such as climate scenario analysis for investment funds, CCP stress testing and the establishment of common methodologies for climate-related risk analysis together with other public bodies.

ESMA will focus on its three priorities with a comprehensive list of actions within: investment management, investment services, issuers’ disclosure and governance, benchmarks, credit and ESG ratings, trading and post-trading and financial innovation. Several of these actions will also add to finalising the European Commission’s 2021 Renewed Sustainable Finance Strategy.

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Next steps

ESMA has already set off on the first Roadmap activities to confirm it can deliver on its aspiring plans. A call for stakeholder candidates to join a new Consultative Working Group supporting ESMA’s Coordination Network on Sustainability will shortly be launched.

The Roadmap, including the identified priorities and the sectors of focus will be kept under review by the ESMA during the entire implementation period of 2022 to 2024. This will safeguard the fact that it will uninterruptedly address the most paramount challenges related to ESMA’s sustainable finance mandate, as this important field continues to evolve.

Source: ESMA