ESMA statement on sustainability disclosure in prospectuses

The European Securities and Markets Authority (ESMA) has issued a Public Statement on sustainability disclosures expected to be included in prospectuses, with the intention to promote coordinated action by national securities regulators across the EU regarding the sustainability-related disclosures that should be included in prospectuses. 

For those less familiar, a prospectus is a regulatory document that companies must file when issuing new securities (either equity or debt) in the market. It is a form of disclosure that is not “continuous” (such as quarterly and annual financial results) but ad hoc. 

We find particularly noteworthy several references to the fact that disclosures should be consistent; in other words, that information published in a company’s non-financial reporting in accordance with the Non-Financial Reporting Directive (NFRD) or eventually the Corporate Sustainability Reporting Directive (CSRD) should be included in equity prospectuses, to the extent this information is material. 

Since materiality is the determining criteria for including information under NFRD and CSRD, then it’s just easier to remember that if you disclose it in your annual management report, you should include it in a prospectus. Also noteworthy are the details about disclosures in relation to ‘use of proceeds’ bonds and sustainability-linked bonds, pointing to increased granularity of sustainability performance disclosures to a broader set of investors in the fixed income market, not just the equity market.