The EU’s securities markets regulator, the European Securities and Markets Authority (ESMA), published its Sustainable Finance Roadmap 2022-2024. The Roadmap, which build on ESMA’s 2020 Strategy on Sustainable Finance, defines priority areas and related actions for the period 2022-2024. ESMA highlighted a number of key challenges of the current sustainable finance context in the EU (e.g. diversity in the interpretation and application of sustainable finance legislation) which constitute the following three priorities for ESMA’s sustainable finance work: (1) tackling greenwashing and promoting transparency; (2) building National Competent Authorities’ (NCAs) and ESMA’s capacities in the sustainable finance field; (3) monitoring, assessing and analysing environmental social governance (ESG) markets and risks.
The ESG investments growing and the rapidly evolving markets give an opportunity for greenwashing. Greenwashing, which is a complex and multiple problem and can be defined in a number of ways, has different effects and detrimentally impacts investors who look for sustainable investments. ESMA proposes investigating against that in cooperation with NCAs, defining the fundamental features and addressing it with coordinated actions across multiple sectors to find EU solutions relating to safeguarding the investors.
The continuously growing importance of sustainable finance requires ESMA and NCAs to develop skills to understand and treat the supervisory implications of new regulations and of novel market practices in this area. Doing so will require training initiatives, sharing supervisory experiences among NCAs and agreeing on common supervisory standards, which create a common supervisory culture across the EU.
It is important to identify risks and vulnerabilities which may negatively impact investors or financial market stability on a regular basis. The areas of capital markets legislation and the data-analytical capabilities have already existed, and it will be key to apply to activities such as climate scenario analysis for investment funds, central counterparty clearing house stress testing and creating common methodologies for climate-related risk analysis with other European supervisory authorities, EU institutions and bodies. On the other hand, the ESMA will monitoring developments in the EU carbon markets.
The Roadmap consists a comprehensive list of actions with timeline and priorities. During the whole implementation period, ESMA will continuously review it in order to ensure the address of significant challenges.