Author: İdil Yıldırım Günaydın
Introduction
As this newsletter moves into a more sustainable future with eco-friendly Exlibris, so does the EU’s financial markets regulator and supervisor, the European Securities and Markets Authority (“ESMA”). In light of its 2023-2028 strategy, ESMA supports the Environmental, Social and Governance (ESG) transition by taking regulatory or supervisory actions in this area while maintaining investors’ confidence in ESG investments by promoting high-quality sustainability disclosures and hence reducing the risk of greenwashing. Consequently, on 11.07.2023, ESMA issued its public statement (“Public Statement”) outlining its expectations on sustainability-related disclosures provided in prospectuses for both equity and non-equity securities.
Despite being primarily addressed to the EU National Competent Authorities (NCAs), the Public Statement is also intended to be considered by issuers and advisors when drawing up prospectuses that have an ESG component. The Public Statement has particular importance in providing useful insight into sustainability-related disclosures that will be included in the prospectuses and alleviating the absence of a legal framework pending the adoption of legislative proposals for the EU Listing Act and the Regulation on European Green Bonds. While the Public Statement is addressed to both equity and non-equity securities, this article focuses on sustainability-linked bonds.
Expected ESG Disclosures in Prospectuses: General Principles
The Public Statement underlines that following provisions of the Prospectus Regulation , ESMA expects that material sustainability-related disclosure is included in equity and non-equity prospectuses as well as final terms. Under Article 6 (1) of the Prospectus Regulation, “a prospectus should contain the necessary information which is material to an investor for making an informed assessment of a) the assets and liabilities, profits and losses, financial position, and prospects of the issuer and of any guarantor; b) the rights attaching to the securities; and c) the reasons for the issuance and its impact on the issuer”. Accordingly, ESMA refers to Recital 54 of the Prospectus Regulation, outlining that “environmental, social and governance circumstances can also constitute specific and material risks for the issuer and its securities and, in that case, should be disclosed”.
ESMA also recommends issuers take the following points into consideration while drafting sustainability-related matters in prospectuses...
