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ESMA issues findings on short-termism in financial markets

  • ESMA (European Securities and Markets Authority) (dark gray) Image

18 Dec 2019

Following its consultation in July 2019, the European Securities and Markets Authority (ESMA) has published its findings and recommendations on potential short-term pressures in securities markets.

The final report makes recommendations to the European Commission for action in key areas. Decisive actions are recommended for areas such as the disclosure of Environmental, Social and Governance (ESG) factors. These include:

  • amending the Non-Financial Reporting Directive to establish principles for high quality non-financial information along with a limited set of specific disclosure requirements;
  • promoting a single set of international ESG disclosure standards; and
  • requiring the inclusion of non-financial statements in annual financial reports.

Other areas investigated included the use of fair value measurement in financial statements. ESMA did not identify any need for amending existing requirements in the area of fair value measurement, particularly with respect to the treatment of equity and equity-like instruments in IFRS 9 Financial Instruments, to address concerns with undue short-termism.

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