ESMA releases opinion on sustainability framework

July 30th, 2024

The European Securities and Markets Authority (ESMA) has published an opinion on the EU’s Sustainable Finance Regulatory Framework, calling for long-term improvements.

The financial markets regulator said that while the framework has implemented safeguards, including regulations against greenwashing, the rules could further evolve to support investors.

It has published a set of recommendations to improve the usability and coherence of the framework and said it should provide investors with the information and tools needed to make effective decisions.

It said: “This is even more critical for retail investors who may not have the same means, expertise and understanding as professional investors and are, therefore, likely to rely on investment advice for their investment decisions.”

It recommended that the EU taxonomy become the sole, common reference point for the assessment of sustainability and should be embedded in all legislation around sustainable finance.

It also said the taxonomy should be completed for all activities that can substantially contribute to environmental sustainability and that a social taxonomy should also be developed.

ESMA also recommended that the framework include a definition of transition investments to support their development and provide legal clarity.

It said that the rules should require all financial products to disclose some minimum basic sustainability information and should outline a categorisation system for products based on a set of clear eligibility criteria.

The regulator also recommended that ESG data products should be introduced, that consumer and industry testing should be carried out before implementing policy solutions, to ensure they are suitable for retail investors.

ESMA recently released a report on greenwashing, calling for improved supervision and market practice to enhance the integrity of sustainability-related claims.

Minerva’s blog focuses on the latest developments in ESG investing and stewardship. Minerva is a global provider of sustainable stewardship solutions with over 25 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data, enabling them to navigate the intricate landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.