ESMA Finds Improvements Needed In Supervision Of Sustainability Risks And Disclosures
The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has published its report on the Common Supervisory Action (CSA) carried out in 2023 and 2024 with National Competent Authorities (NCAs) on the integration of sustainability risks and disclosures in the investment management sector.
The level of compliance with the framework on the integration of sustainability risks and disclosures is overall satisfactory. Still, ESMA has found that improvements are needed in the integration of sustainability risks, entity level SFDR disclosures and product level SFDR disclosures.
In the course of 2023 and 2024, NCAs regularly shared their knowledge and experience to promote supervisory convergence on how they supervise the integration of sustainability risks and disclosures. The aim of the CSA was to assess, foster and enforce the compliance of supervised entities with the purpose of assessing the compliance of supervised asset managers with the relevant provisions in the SFDR, the Taxonomy Regulation and relevant implementing measures, including the relevant provision in the UCITS and AIFMD implementing acts on the integration of sustainability risks.
This CSA has helped NCAs to identify several breaches that were addressed by the supervised entities.
Next steps
Building on the findings of the CSA exercise, ESMA will facilitate discussions among NCAs on the topic of sustainability risks and disclosures. Going forward, ESMA encourages NCAs to continue proactive engagement with market participants and follow up with cases where they detect vulnerabilities.