The European Securities and Markets Authority (ESMA) published an opinion on the Sustainable Finance Regulatory Framework of the EU proposing changes to the existing framework that could facilitate investors' access to sustainable investments. 

If implemented, the ESMA’s proposal is expected to simplify sustainable assessment, enhance transparency, introduce categorization, improve data quality, and foster transition related products as per the recommendations. This can potentially improve the ability of private and impact investors to better align their capital with their sustainability objectives. 

Let’s explore the key recommendations of the proposal by ESMA in detail.  

Key ESMA recommendations to revise the Sustainable Finance Regulatory Framework

• All sustainable finance legislation should incorporate the EU Taxonomy as the only standard reference point for evaluating sustainability.
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  The EU Taxonomy should be completed for all actions that have the potential to significantly contribute to environmental sustainability and a social taxonomy should be created.
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  A clear and precise definition of transition investments should be incorporated into the framework for providing more legal clarity and support the creation of transition-related products. 
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  All the financial products that come under the framework should disclose some minimum basic sustainability information that is covering social and environmental characteristics. 
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  A product categorisation system should be implemented specifically for sustainability transition, based on a set of precise eligibility criteria and legally-mandated transparency duties. 
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  ESG data products should be brought within the regulatory perimeter, maintain the consistency of ESG indicators, and ensure the accuracy of estimations. 
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  Industry and consumer testing should be carried out before implementing policy solutions for ensuring they are suitable and feasible for average investors. 

Next steps

The above opinion builds on the findings of the Joint ESA opinion on review of SFDR and the ESMA progress report on greenwashing. In addition, it represents the last component of EC requests for input related to greenwashing. Read the full opinion released by ESMA. 

While you’re here…

The ESMA’s proposal to revise the Sustainable Finance Regulatory Framework can potentially improve the ability of private investors to make sustainable investments and align their capital with sustainability objectives. However, navigating this evolving landscape requires sophisticated tools to efficiently source deals, conduct thorough due diligence, and assess ESG performance. These are areas where Auquan can help. 

Auquan automates and streamlines deal sourcing, due diligence, monitoring, sustainability, and compliance workflows so teams can move faster and more efficiently. Using advanced AI, Auquan generates material and sustainability insights on any entity worldwide — public or private — fine-tuned for your team’s investment and lending requirements.

Let’s explore how Auquan can help you and your team eliminate tedious and time-consuming manual data work and focus more on what you do best: making strategic decisions ahead of the market.