At the Cross-Border Distribution Conference held on 25 May, Natasha Cazenave, executive director, European Securities and Markets Authority, started off by informing the audience that structural pieces of legislation are upcoming for the asset management industry. The first area of focus will be on liquidity management tools to ensure that the “asset management industry is resilient, and that the fund managers have all the tools in place to be able to weather any particular stress.”
The second point will be on reporting, as the regulator is mindful of “having meaningful, comprehensive and high-quality reporting to support good supervision and good risk management at the industry level,” noted Cazenave.
Third, the retail investment strategy that was published on Wednesday is seen by Esma as “very impactful” given that it regulates “how you engage with retail investors” through the client facing dimension, the distribution and that “the investor gets the best possible deal and the good information to be able to make informed decisions,” said Cazenave. Finally, she pointed at the progressing and the fast-evolving sustainability agenda.
Esma’s 2023-2028 agenda
Cazenave reminded the audience about Esma’s five strategic priorities: fostering effective markets and financial stability, ensuring effective supervision across the EU, enhancing retail protection, fostering technological innovation and the effective use of data, and enabling sustainable finance.
She also explained that Esma will have to address new mandates coming from EU organisations related to the EU’s Markets in Crypto Assets (Mica) regulation and the Digital Operational Resilience Act (Dora).
A thorough analysis of the greenwashing phenomenon across the value chain--issuers, distributors, fund managers--will be published next week.
To emphasise the importance of digital matters, Cazenave talked about a new data strategy that aims at “adding value [in the use] of data for effective supervision to be able to provide an EU wide perspective for stakeholders, for academics for the national competent authorities.”
Progress on combating greenwashing?
Esma understands that greenwashing could be defined as the “disconnect between what the investor expects or understands” about a product against “the actual strategy or what the product can actually deliver,” said Cazenave.
The pan-European regulatory body has focused on the name of the fund, as it is starting point for an investment in sustainable products. Some rules have been put in place to ensure consistency when the word “sustainable” is in the name of the fund. Further steps are being contemplated.
Secondly, Cazenave said that the outcome of a “thorough analysis of the greenwashing phenomenon across the value chain--issuers, distributors, fund managers”--will be published next week. It will attempt at answering questions such as “what do people consider to be a possible decision of greenwashing? how does it manifest itself? what does it mean?” said Cazenave.
Not wishing to provide the conclusion of the report, Cazenave said, nevertheless, that an organisation must be “very careful in the way you substantiate [your] claims” and “that you are able to demonstrate” that your disclosure is in line with what is done.
“We need to prevent greenwashing to make sure [that] we maintain trust in the system,” Cazenave said. “So that’s the fundamental goal, if we lose that trust, we will lose the ability to channel the funds and finance the transition.”
Eltif 3.0 already on the making?
Cazenave asked the audience to provide further feedback, as Esma is “keen to get your input, how do we make sure we get the balance right.” For instance, the consultation looks at whether “we introduce minimum holding periods, notice periods, what conditions.” The goal of Esma, she stated, is to increase the attractiveness, the resilience, and the strength of the product while providing clarity to the investors about its illiquidity.