The European Securities and Markets Authority (ESMA) has published a new questionnaire to identify short-term pressures within the financial sector.
investors, issuers, UCITS management companies, self-managed UCITS investment companies, AIFMs and the trade association within the finance world have been invited to take part in the survey.
ESMA defines short-termism as “the focus on short time horizons by both corporate managers and financial markets, prioritising near-term shareholder interests over long-term growth of the firm.”
Sections to be covered by the questionnaire are Investment strategy and investment horizon; Disclosure of Environmental, Social and Governance (ESG) factors and the contribution of such disclosure to long-term investment strategies; The role of fair value in better investment decision-making; Institutional investors’ engagement; Remuneration of fund managers and corporate executives; and Use of CDS by investment funds.
Responses to this will contribute to ESMA’s analysis of potential causes of unwarranted short-termism on institutions. Its aim is to uncover where existing rules may contribute to mitigating undue short-termism and areas where the rules might aggravate short-term pressures, it said.
By the end of the year, ESMA will provide the European Commission a report based on its findings. In the report, evidence and advice will be given on potential undue short-termism, which could see the Commission take policy action.
The European Commission has requested a similar questionnaire of all three of the European Supervisory Authorities, as it hopes to ensure security of the ecosystem.
This questionnaire will be open for five weeks, closing on 29 July 2019.
Before responding to the questionnaire, ESMA encourages people to familiarise themselves with its explanatory note on shot-termism, giving background information and definitions for each section of the survey.
