The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, published its Strategy on Sustainable Finance on 6th February 2020. This should be of special interest to Financial Analysts and especially to those who are, or are considering becoming, EFFAS Certified ESG Analysts. The strategy sets out how ESMA will place sustainability at the core of its activities by embedding Environmental Social, and Governance (ESG) factors in its work. ESMA’s key priorities include transparency obligations, risk analysis on green bonds, ESG investing, convergence of national supervisory practices on ESG factors, taxonomy, and supervision, all of which are on the CESGA® syllabus.
Steven Maijoor, Chair of ESMA said:
“The financial markets are at a point of change with investor preferences shifting towards green and socially responsible products, and with sustainability factors increasingly affecting the risks, returns and value of investments. ESMA, with its overview of the entire investment chain, is in a unique position to support the growth of sustainable finance while contributing to investor protection, orderly and stable financial markets.” (https://www.esma.europa.eu/press-news/esma-news/esma-sets-out-its-strategy-sustainable-finance)
ESMA’s key priorities highlighted in the strategy include:
- completing the regulatory framework on transparency obligations and to produce joint technical standards in cooperation with the EBA and EIOPA
- reporting on trends, risks and vulnerabilities (TRV) of sustainable finance
- using the data at its disposal to analyse financial risks from climate change, including potentially climate related stress testing market segments
- pursuing convergence of national supervisory practices on ESG factors with a focus on mitigating any risk of greenwashing, preventing mis-selling practices, and fostering transparency and reliability in non-financial information reporting
- participating in the EU platform on Sustainable Finance to develop and maintain the EU taxonomy and monitor capital flow to sustainable finance; and ensuring ESG guidelines are adhered to in the entities that ESMA supervises while accepting any new supervisory mandates in this area
This strategy is ESMA’s reaction to the EU having adopted the Paris Agreement on climate change and the UN 2030 Agenda for Sustainable Development in 2015. The European Commission’s Action Plan on Financing Sustainable Growth has 3 main objectives to:
- reorient capital flows towards sustainable investment, in order to achieve sustainable and inclusive growth
- manage financial risks stemming from climate change, environmental degradation and social issues
- foster transparency and long-termism in financial and economic activity
These are all areas financial analysts need to understand for their career development and are all included in the syllabus of the EFFAS Certified ESG Analyst CESGA® Programme. For more information on this Programme click here.