Italian securities market regulator Consob (Commissione Nazionale per le Società e la Borsa) has urged financial intermediaries to improve transparency on information disclosed on sustainable finance and ESG products.
Financial intermediaries include Società di Gestione del Risparmio (SGR), which are managers of pension funds’ assets.
In a statement, the regulator warned financial intermediaries that information on sustainable investment products has to be “increasingly clear, concise and understandable even for less sophisticated clients”.
The preferences and the needs of clients relating to ESG “must also be effectively considered” to assess whether investments and governance are appropriate when marketing the products, it said.
Consob has issued the warning in response to the extensive amount of regulation harvested at European Union level, which has “rapidly stratified” over the last few years, the statement added.
Work has progressed at EU level to review the Sustainable Financial Disclosure Regulation (SFDR), the Corporate Sustainability Reporting Directive (CSRD) and MiFID II, with the European Supervisory Authorities (ESAs) analysing greenwashing risks, and proposing new regulations on the transparency and integrity of ESG rating activities, it said.
The new EU regulatory framework has become complex, Consob said, adding that for this reason it has launched a series of specific actions aimed at monitoring the methods used to implement EU rules on sustainable finance.
The financial industry in Italy is gradually adjusting to the new provisions on sustainability, with positive and negative operational practices on ESG disclosure emerging following the analysis conducted by the regulator.
Financial intermediaries tend to give little space to policies adopted to integrate sustainability risks in consultancy or portfolio management, Consob said.
Information on key regulatory concepts linked to sustainability, particularly the notions of “sustainability risk” and “PAI” (Principle Adverse Impact), are confusing, making the content and purpose of the information difficult to understand, it added, highlighting aspects that need further improvement by financial intermediaries.
Consob noted that financial intermediaries are “doing a good job” instead when it comes to disclosing information on the consistency between remuneration policies and the integration of sustainability risks. Information on the integration of ESG risks into remuneration policies is “clear and evident, even graphically,” it said.
The regulator will continue to closely supervise financial intermediaries to find evidence of full compliance with the complex regulatory framework on sustainable finance.
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