Introduction
On 30 June 2025, the European Securities and Markets Authority ("ESMA") published its Final Report on the common supervisory action ("CSA") it carried out during 2023 and 2024 with national competent authorities ("NCAs") in relation to the integration of sustainability risks and related disclosures in the investment management sector.
The purpose of the CSA was to assess the compliance of asset managers with the current regulatory framework under the Sustainable Finance Disclosure Regulation ("SFDR") and the AIFMD and UCITS Directive implementing measures on the integration of sustainability risks.
Findings
ESMA's report finds that levels of compliance with the regulatory framework are broadly satisfactory but that certain improvements remain necessary, including in relation to the integration of risks and SFDR disclosures (at both entity and product level).
Our overview of the main issues and vulnerabilities identified within the CSA analysis is below.
- Disclosures – inconsistent disclosures, vague and overly general language and discrepancies between pre-contractual, periodic and website disclosures and marketing material;
- PAI statements at entity level – inadequate level of details, unsatisfactory explanations where PAIs are not considered and inconsistences in PAI calculations;
- Integration of sustainability risks – lack of properly documented policies and lack of escalation procedures in case of breach of policies;
- Resources – cases of low number of dedicated employees for sustainability tasks, or unsatisfactory knowledge of sustainability matters from the relevant employees;
- Remuneration policies – lack of specific criteria and indicators to measure how remuneration policies are consistent with the integration of sustainability risk;
- Controls and processes in place – lack of processes to ensure that the description of funds' ESG strategies is substantiated by the ESG metrics/data used or consistent with environmental and/or social characteristics and good governance principles; and
- ESG data – data sometimes incomplete or inaccurate and lack of verification or review process of data from third party providers.
Next Steps
ESMA plans to facilitate discussions between NCAs on the areas for improvement the report identifies and encourages NCAs to proactively engage with asset managers on the topic generally, and particularly where vulnerabilities are identified.
As flagged in its December 2024 Investment Funds Supervision Bulletin, a Central Bank of Ireland industry communication will follow the publication of ESMA's report. In the meantime, firms should take into account ESMA's findings when reviewing their sustainability-related pre-contractual, periodic and website disclosures and related policies and procedures.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
