The European Securities and Markets Authority launched three public consultations in the areas of securities trading, investment funds and credit rating agencies (CRAs). The consultations focus on environmental, social and good governance considerations with regards to investment firms, investment funds and CRAs. The draft advice and proposed guidelines touch upon organizational requirements, operating conditions, risk management, conflicts of interest, product governance and disclosure requirements.
The first two consultations seek stakeholders’ input on draft technical advice for the integration of sustainability risks and factors into the Markets in Financial Instruments Directive II (MiFID II) (securities trading) and the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings in Collective Investment in Transferable Securities (UCITS) Directive (investment funds). The third consults on CRA guidelines aimed at improving the quality and consistency of disclosures of environmental, social and governance (ESG) factors when considered as part of a credit rating action.
Steven Maijoor, ESMA’s chair, said in a statement: “Climate change is a reality. Therefore, moving our economies to a greener, more sustainable path has become a necessity and as financial regulators we have to ensure that the financial sector supports this shift. We need to respond to the increasing demand of investors for sustainable investments and to conduct business by taking into account opportunities and risks stemming from climate change, environmental degradation and related social issues.”
ESMA’s draft advice was developed in cooperation with the European Insurance and Occupational Pensions Authority (EIOPA), which has received a similar mandate regarding Solvency II and the Insurance Distribution Directive (IDD).