ESMA sets stage for sustainability disclosure in financial prospectuses


The European Securities and Markets Authority (ESMA) has outlined expectations for sustainability-related disclosures in both equity and non-equity prospectuses.

The aim is to enhance the ability of investors to make informed decisions, provide issuers with clarity on expected disclosures, and ensure a synchronised approach to examining sustainability-related disclosures by National Competent Authorities (NCAs).

The guidance published by ESMA underlines an expectation for issuers to substantiate any claims about their sustainability profile. This might be achieved by referring to foundational data or assumptions, citing specific market standards or labels, or referencing third-party research or analysis.

For equity prospectuses, the regulator anticipates conformity with the Non-Financial Reporting Directive (NFRD), the existing EU sustainability reporting framework, or its imminent update, the Corporate Sustainable Reporting Directive (CSRD). Compliance is required to the extent that the disclosures are substantial.

The new guidelines also pertain to “use of proceeds” bonds and sustainability-linked bonds. For bonds such as green, social and sustainability bonds, ESMA suggests that prospectuses should disclose information about the use of proceeds, accompanied by data that allows investors to evaluate the ambition underlying project evaluation and selection. Prospectuses for sustainability-linked bonds should incorporate details about selected key performance indicators (KPIs) and sustainability performance targets (SPTs), as well as information that enables evaluation of the consistency of KPIs and SPTs with relevant science-based targets and the issuer’s sustainability strategy.

Finally, ESMA notes that some issuers include sustainability-related information in their advertisements that doesn’t appear in their prospectus. The regulator encourages the inclusion of this information in prospectuses if it is significant, adding that the importance of the sustainability-related disclosure in the advertisement for investors indicates its materiality.

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