European Securities and Markets Authority Issues Survey on Short-Term Pressure Imposed by the Financial Sector

The European Securities and Markets Authority is seeking responses to its survey examining short-term pressure on corporations from the financial sector. The survey forms part of an investigation prompted by the European Commission into how short-termism in market practices may be inhibiting the EU’s progress towards a sustainable economy. ESMA’s survey is aimed at investors, issuers, management companies of undertakings for the collective investment in transferable securities, self-managed UCITS investment companies, alternative investment fund managers and the trade associations of financial market participants. Responses to the questionnaire must be submitted by July 29, 2019.

On February 1, 2019, the European Commission published a call for advice to the European Supervisory Authorities, requesting the ESAs to collect evidence on undue short-term pressure from the financial sector on corporations. The Commission’s request sprang from concerns that corporations were failing to take long-term sustainability risks and opportunities into account when making business decisions. This is contrary to Action 10 of the EU’s Sustainable Finance Action Plan, which aims to foster transparency and long-termism in financial and economic activity by exploring possible drivers of undue short-termism. ESMA has identified the following six areas that it wishes to gather evidence on as part of its survey:
 

1. Investment strategy and horizon;
2. Disclosure of Environmental, Social and Governance factors and the contribution of such disclosure to longer-term investment strategies;
3. The role of fair value in better investment decision-making;
4. Institutional investors’ engagement;
5. Remuneration of fund managers and corporate executives; and
6. Use of credit default swaps by investment funds.

ESMA will use the results of the survey to inform its report to the European Commission, due to be delivered by December 2019. The Commission hopes that the investigation will provide an initial assessment of evidence on the potential for future development of policy, evaluate the need for regulatory action and potentially propose specific areas to be addressed by policy.

View ESMA's Explanatory Note on its Survey.

View the European Commission's Call for Evidence.

View the European Commission's Action Plan on Financing Sustainable Growth.

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