On 27 October 2022, the European Securities and Markets Authority (ESMA) announced that it is changing its Union Strategic Supervisory Priorities (USSPs) to include ESG disclosures alongside market data quality. According to ESMA, this represents an important step in the implementation of its strategy, which gives a prominent role to sustainable finance.

The USSPs are a key way in which ESMA coordinates supervisory action with National Competent Authorities (NCAs) on certain topics, with the aim being to provide a comprehensive response to address key market risks across the EU. NCAs are required to take the priorities into account when drawing up their own work programmes.

The update notes that ESMA and the NCAs intend to foster transparency and comprehensibility of ESG disclosures across key segments of the sustainable finance value chain and, in this way, tackle greenwashing.. In addition, ESMA aims to gradually promote an increased scrutiny on ESG disclosures through effective and consistent supervision. This will mean that  ESMA and the NCAs will be able to take active steps to protect investors and facilitate investments in a credible ESG market.

Regarding market data quality, ESMA has already developed and applied common methodologies and thematic reviews. The update highlights that both ESMA and the NCAs will continue to engage in further targeted supervisory work.

According to the update, the new priority of ESG disclosures replaces costs and performance for retail investment products, in respect of which  ESMA and the NCAs have carried out a number of actions including:

  • Common Supervisory Action (CSA) on costs and fees under the UCITS framework;
  • CSA on information on MiFID II costs and charges;
  • Mystery shopping exercise (with some NCAs);
  • CSA on MiFID II suitability requirements and product governance
  • Interpretative aids (Guidelines, Q&As);
  • Draft regulations and technical advice; and
  • Annual Statistical Report monitoring costs’ performance.

In terms of next steps, ESMA and the NCAs will continue working together in relation to ESG disclosures and market data quality. At the same time, ESMA and the NCAs will follow-up on previous work, namely monitoring closely the evolution of costs as a key element for investors protection.