Sustainable finance

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has responded to the European Commission’s (EC) targeted consultation on the establishment of the EU green bond standard (GBS). ESMA highlighted that the success of the EU GBS will be determined by whether it is seen as a reliable indicator of investment in sustainable economic activities.

Building on its response to the EC’s consultation on the Renewed Sustainable Finance Strategy from July 2020, where specific points in relation to the EU GBS framework were raised, ESMA highlights the following key messages:

  • The success of the EU GBS will, to a large extent, be determined by whether it is seen as a reliable indicator of investment in sustainable economic activities. In order to ensure reliability and alignment with the Taxonomy, the GBS will require external reviewers conducting rigorous assessments of an issuer’s green bond framework;
  • The best way of ensuring high quality assessments is to introduce a formal EU registration and supervision regime of these external reviewers. This will ensure that the entities conducting such assessments have adequate resources, are using robust methodologies and have measures in place to protect against conflicts of interest;
  • It is important to ensure that the final regime will not result in market concentration of external reviewers which may disadvantage issuers, especially SMEs, as well as smaller external reviewers, while still ensuring that the market develops in a properly regulated and supervised way at EU level; and
  • It supports the development of a social EU Taxonomy as a prerequisite for reliable standards for social bonds.

The European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) published today a survey seeking public feedback on presentational aspects of product templates, pursuant to Article 8(3), Article 9(5) and Article 11(4) of the Regulation on sustainability‐related disclosures in the financial services (SFDR). The survey is open for comments until 16 October 2020.

The ESAs propose to standardise the disclosure of information for financial products that promote environmental and/or social characteristics or have a sustainable objective. The use of such mandatory templates will improve comparability of different financial products in different EU Member States and are intended to be included in existing disclosures provided by Alternative investment fund managers (AIFMs), Undertakings for Collective Investment in Transferable Securities (UCITSs), insurance undertakings, Institutions for Occupational Retirement Provision (IORPs) or providers of pan-European Personal Pensions Products (PEPPs).

In particular, the ESAs are inviting stakeholders to comment on the layout of the templates, which reflects the text of the draft Regulatory Technical Standards (RTS) from the recent public consultation on the SFDR that ran from 23 April until 1 September 2020.

The final content of the templates is subject to the outcome of a concurrent consumer testing exercise and the ESAs’ final report on the draft RTS under SFDR.