The European Securities and Markets Authority (ESMA) 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.
ESMA 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 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.
ESMA further recommended that the taxonomy should be completed for all activities that can substantially contribute to environmental sustainability and that a social taxonomy should also be developed. And that the framework should include a definition of transition investments to support their development and provide legal clarity.
The rules should require all financial products to disclose some minimum basic sustainability information and should outline a categorization system for products based on a set of clear eligibility criteria, according to ESMA.
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.
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