On 30 March 2022, the European Securities and Markets Authority (ESMA) published a speech given by Natasha Cazenave, Executive Director at the ICI Investment Management Conference. The speech is entitled Key priorities for the asset management industry in 2022: sustainable finance and systemic risk and focusses on:

  • Developing a framework for the asset management industry to positively contribute to the climate transition.
  • Strengthening the resilience of investment funds to market, credit and liquidity shocks.

In terms of climate transition, key points in the speech include:

  • The ESMA has noted that market participants are actively preparing for the application of the detailed rules contained in the “implementing measures” of the Sustainable Finance Disclosure Regulation (SFDR) which will apply from 1 January 2023 and welcomes the significant efforts made to comply with these in a market that is still evolving.
  • The ESMA and the other European Supervisory Authorities (ESAs) are preparing the review of the indicators for principal adverse impacts, a key part of the SFDR disclosures.
  • An development is that although the SFDR was primarily a transparency regulation, both fund managers and investors are increasingly treating the disclosures categories as product classification.
  • The ESMA expects to provide technical advice to the European Commission on future initiatives in this area based on national authorities’ supervisory experience. It is also working towards publishing guidance and questions and answers on a number of stakeholder questions it has received with  regard to implementation and timing of the SFDR.
  • The ESAs intend to play an active part in ensuring these taxonomy related disclosures are relevant for investors and valuable for the market.
  • A key challenge is data. A legislative proposal on corporate sustainability reporting is currently being discussed in the Council and the European Parliament.

In terms of financial stability and the fund management industry, key points in the speech include:

  • The review of the EU Money Market Fund Regulation will be launched by the European Commission by mid-2022.
  • The ESMA has issued guidelines in liquidity stress testing and is actively monitoring liquidity risks within open-ended funds.
  • The ESMA has just launched a common supervisory action on fund valuation.

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