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). While 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.
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 organisational requirements, operating conditions, risk management, conflicts of interest, product governance and disclosure requirements.
Steven Maijoor, Chair, said: “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.
“We are, therefore, seeking views to inform our advice to the Commission on how to include environmental, social and governance factors in firms’ investment decision processes and the integration of relevant sustainability risks within firms’ business models and procedures.”
In order to ensure consistency, 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).
Next steps
The EC requested ESMA to provide technical advice on the integration of sustainability risks and factors in the UCITS Directive, AIFMD and MiFID II by 30 April 2019. ESMA, along with the consultations, will hold an open hearing on 4 February 2019 and will use the consultation feedback to finalise its draft advice to the EC.
The Consultation Paper on credit ratings has a three-month consultation period with a view to publishing the final report before the end of July 2019.
