ESMA consults on short-termism in financial markets
The EU financial markets watchdog has launched a consultation on potential short-term pressures on corporations emanating from the financial sector.
The consultation takes the form of a survey addressing investors, issuers, and trade associations, and covers six areas:
- investment strategy and investment horizon;
- corporate reporting on environmental, social and governance (ESG) matters and its contribution to long-term investment strategies;
- the role of fair value accounting in better investment decision-making;
- engagement by institutional investors;
- fund manager and corporate executive pay; and
- the use of credit default swaps by investment funds.
The European and Securities Markets Authority (ESMA) said it was “not claiming there is a causal relationship” between these areas and short-termism, but it was seeking stakeholders’ views on them “to better understand their interaction with short-termism”.
In the context of its sustainable finance action plan, in February the European Commission issued ESMA and the other two European supervisory agencies with a request to collect evidence on “potential undue short-term pressure from capital markets on corporations”.
ESMA said the Commission’s mandate indicated that decisions taken by corporations did not “fully reflect long-term aspects that would be required to put the EU economy on a sustainable path and manage the transition towards a low-carbon economy”.
The questionnaire will be open until 29 July. ESMA is due to report to the Commission on the findings by December.