The European Securities and Markets Authority (ESMA) has identified significant gaps in sustainability disclosures and risk integration across the EU investment sector, raising concerns over compliance with ESG regulations and the carbon neutral strategy. The findings stem from ESMA’s 2023–2024 Common Supervisory Action (CSA), conducted in collaboration with national regulators, assessing adherence to the Sustainable Finance Disclosure Regulation (SFDR), EU Taxonomy, and related frameworks. 

While ESMA rated overall compliance as “satisfactory,” the report exposes multiple shortcomings at both entity and product levels. These include vague or boilerplate ESG disclosures in fund documentation, weak governance structures, and inconsistencies between stated ESG goals and actual investment practices. In some instances, breaches of applicable rules were identified and addressed by national authorities. 

Key areas of concern highlighted in the report: 

• Lack of detail in sustainability risk disclosures 

• Inconsistent ESG risk integration into investment decisions 

• Unclear assignment of ESG oversight responsibilities 

• Misalignment between ESG objectives and real portfolio actions 

ESMA has called on national supervisors to increase their scrutiny, engage proactively with asset managers, and promote uniform enforcement of sustainability rules. It also plans to coordinate best practices across EU jurisdictions to close compliance gaps and strengthen market trust in ESG claims. 

These developments come amid rising regulatory pressure, with new mandates under the European Sustainability Reporting Standards (ESRS) and Corporate Sustainability Due Diligence Directive (CSDDD) set to reshape disclosure obligations. 

As investor demand for ESG-compliant financial products continues to surge, ESMA’s findings underscore the urgent need for transparency, accountability, and alignment between investment strategies and Europe’s broader carbon neutral strategy. Enhanced supervision will be key to ensuring that ESG commitments are credible and effectively implemented across the financial industry. 

Source: 

https://esgnews.com/esma-flags-gaps-in-sustainability-disclosures-calls-for-tighter-oversight-in-investment-sector/