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- The Capital Markets Union
- What is the Capital Markets Union (CMU)?
- Capital Markets Union: Delivering one Year after the Action Plan
- The European Single Access Point (ESAP)
- European Single Access Point (ESAP): What is it?
- ESAP’s Governance
- Greenomy: your Sustainable Finance Reporting Solution
The Capital Markets Union
What is the Capital Markets Union (CMU)?
The Capital Markets Union was launched in 2015 to align the fragmented capital markets in the EU. Capital markets refer to the transactions of savings and investments made by suppliers (such as banks and investors) and demanders (such as businesses, governments, and individuals). A fragmented capital market would mean that EU citizens and companies do not have the deep, competitive, efficient, and reliable sources of funding and investment that efficient capital markets can offer.
To solve this, the European Commission set the objective to build a single market for capital. This is arguably needed now more than ever; to support the recovery from the economic crisis caused by the COVID-19 crisis, to transition towards a digital future, and to finance the transition to a green economy. Therefore, on 24th September 2020, the Commission adopted a new CMU action plan.
The CMU action plan proposes 16 legislative and non-legislative actions to create an integrated capital market and to deliver on 3 key objectives, namely:
- To support a green, digital, inclusive, and resilient economic recovery by making financing more accessible to European companies.
- To make the EU an even safer place for individuals to save and invest in the long-term.
- To integrate national capital markets into a genuine single market.
Capital Markets Union: Delivering one Year after the Action Plan
One year after the 2020 Capital Markets Union Action Plan, the European Commission delivered on its commitments and proposed measures to further boost European capital markets, by releasing a Communication setting out the actions it would take to stimulate the market. The Communication, released on 25th November 2021, includes a package of measures with legislative proposals to ensure that companies can raise capital across the EU and citizens in the EU can have efficient savings and investments.
The package of measures consisted of 4 legislative proposals for adoption: The European Single Access Point (ESAP), the review of the European Long-Term Investment Funds Regulation (ELTIFs), the Alternative Investment Fund Managers Directive (AIFMD), and the Markets in Financial Instruments Regulation (MiFIR). This package will ensure that investors have better access to business and company data. The measures will also encourage long-term investment and make the cross-border sale of investment funds easier and safer. Overall, the proposals will better connect EU companies with investors, by improving companies' access to finance, expanding investment opportunities for retail investors, and further integrating EU capital markets.
The European Single Access Point (ESAP)
European Single Access Point (ESAP): What is it?
The ESAP stands at the forefront of this package as it promises to provide a single access point for public data and sustainability-related information on EU companies and EU investment products. The public data will be that which is required by EU legislation as well as voluntary data that companies wish to publish on the platform. The European Central Bank has published an opinion on the ESAP and supports the Commission’s initiative to complete the CMU through the establishment of the ESAP. More so as the Commission’s action plan will integrate climate change considerations into ESAP, which will contribute to the ECB’s monetary policy framework and to the imposition of the Legal Entity Identifier as a mandatory identifier in the Union.
In addition to financial information, from this single access point, users will also be able to consult what is known today as non-financial information in a single sustainability report for all those listed on any of the markets of the European Union. This information will create a common data space to support the objectives of the European Green Pact and the EU’s digital strategy to empower users by having reliable data.
The ESAP will be particularly relevant for SMEs, as it will give companies more visibility to investors, opening up more sources of finance. In the ESAP communication, Commissioner McGuiness stated “We don't have a one-stop shop where you can get access to information from companies. If you want to invest, you have to do a lot of work, or you have to pay for someone to do that work for you”.
A single access point is crucial in solving the current fragmented capital markets union. Currently, all the documentation is scattered over the different member states, and coded in different ways and languages. This limits fundraising, which is especially important for SMEs, thus the implementation of the ESAP will enable companies in small capital markets to get more exposure to international investors. Further, by avoiding duplication of work and providing business information in a homogenous way, investors' access to data will be facilitated, assisting with the development of European markets.
ESAP’s Governance
The European Securities Markets Authority (ESMA), which integrates supervisors from the European member states, will be in charge of creating the necessary infrastructure to make the project a reality. Not only will it be in charge of its operations but also of its coordination. ESMA’s next steps will include establishing an advisory steering board with users, preparers, national and European competent authorities to ensure that information on financial products meets the demand for information in the economic world, where civil society can transition to a more sustainable and digitalised future.
No further information has been provided on how the European Commission or ESMA will collect data from issuers, nor how the voluntary information to access better financing conditions will be presented. Whilst the intention of the Commission is that the access to data is free and easy to process, open licenses will be needed for its applications and the costs will need to be covered by public funds in member states and by the European Union itself.
The Commission has asked the ESAP to be established by 31st December 2024 and to not create new reporting requirements further than the ESG data relating to the Corporate Sustainable Reporting Directive (CSRD), the Sustainable Finance Disclosure Regulation (SFDR), and the EU Taxonomy Regulation.
Greenomy: your Sustainable Finance Reporting Solution
Greenomy has already coded the thousands of pages that make up the sustainable finance regulation in the European Union and has set up an ecosystem where its users can access reliable, accessible, and fraud-free information that is either proxy-based or uploaded by the companies themselves. The idea behind Greenomy is to provide all stakeholders with an easy-to-use platform where users know what they need to report, what information to collect, and to automate their taxonomy-aligned scores. This feeds into one of Greenomy’s objectives of avoiding duplication of work for its users, empowering its users through reliable information.
Greenomy’s ecosystem is trusted by stakeholders and different market participants around the world to create a positive network of collaboration that is based on financial and non-financial data. To conclude, Greenomy welcomes the initiative of the Commission to create a European single access point from which market participants can access data in a reliable and harmonised manner.
The first EU Taxonomy reports were due on the 1st of January 2022 and the reports for the SFDR and CSRD will soon have to be collected by market participants in the capital market. Greenomy can help you achieve your reporting standard goals and have access to your data in a simple manner to comply with European sustainable finance legislation. Do not hesitate to get in touch or book your demo today!
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