ESMA speech on retail investment highlights ESG disclosure issues

Written by Zhuan Faraj

On 21 September 2021, the European Securities and Markets Authority (‘ESMA’) published a speech by Natasha Cazenave, its Executive Director, entitled ‘Retail investors’ challenges: what investor protection safeguards should accompany increased retail participation in capital markets?’

As well as examining the impact of costs on investors’ participation and the possibilities for innovative distribution of retail investment products, the speech addresses ESG disclosure challenges.

In particular, it notes that:

• The European Supervisory Authorities (‘ESAs’) are working on a second set of rules relating to taxonomy-specific products disclosures under the Taxonomy Regulation ((EU) 2019/2088).
• A key challenge in developing detailed product disclosures has been attaining comparability of disclosures between different financial products with varying disclosure regimes.
• Article 8 of the Sustainable Finance Disclosure Regulation captures a wide variety of financial products, allowing a range of sustainability strategies. This could make investor understanding of different types of products or strategies challenging.
• Therefore, preventing greenwashing will be a priority for ESMA, and they will be working with national competent authorities to identify effective means to limit the risk of greenwashing.

For further information, a copy of the speech can be found here.