On April 9, 2025, the European Securities and Markets Authority (ESMA) released its Final Report on the Common Supervisory Action (CSA) concerning ESG disclosures under the EU Benchmarks Regulation (BMR). Conducted alongside national regulators, the report evaluates how benchmark administrators are applying the BMR’s ESG disclosure requirements—and offers insights that have impacts across the investment value chain.
Key Observations from the Report
The CSA found significant differences in how benchmark administrators disclose ESG information, with several key points:
- ESG Factor Coverage Varies Across Themes: The report highlights that environmental factors – particularly those related to climate change and carbon emissions – currently benefit from the strongest data coverage and disclosure practices. Greenhouse gas emissions, for example, are commonly reported with defined methodologies. Social factors, including labor rights and community impact, tend to have more limited data availability, while governance-related disclosures (e.g., board composition, executive compensation) vary in depth and consistency across benchmarks.
- Opportunities to Enhance Methodological Transparency: ESMA noted that in many cases, the underlying calculations for ESG factors, especially the optional ones, could be more clearly explained. Enhancing transparency around methodologies would help benchmark users better assess and compare ESG metrics.
- Varied Use of Optional ESG Factors: While mandatory ESG disclosures are generally addressed, the application of optional ESG factors differs significantly among administrators. This reflects a maturing market where practices are evolving and highlights the potential for greater alignment over time.
- Helpful Guidance from ESMA: To support ongoing improvements, ESMA included practical examples and clarifications in the report. This additional guidance aims to encourage more consistent and comparable ESG disclosures moving forward, supporting both administrators and the broader investment community.
What This Means for Asset Managers
Though the report targets benchmark administrators, asset managers – especially those referencing benchmarks in sustainability-related products – have reason to take note:
- Understand Your Benchmarks: ESG disclosures from benchmark providers may directly influence your own product disclosures. Managers should look at how these benchmarks report ESG data and ensure alignment with fund-level ESG goals. Improved disclosures from benchmark administrators—especially around methodologies and factor coverage—will enhance the reliability of what asset managers are passing along to distributors and market participants.
- Watch for Regulatory Expectations: Regulators such as the CSSF in Luxembourg may align expectations across regulations involving ESG-related reporting or product claims. Being proactive in understanding benchmark transparency and ESG factor data availability now can help alleviate future burdens.
- Assess Data Gaps in E, S, and G: When relying on benchmark data for internal ESG analysis or external reporting (e.g., pre-contractual documents, annual disclosures, or the EET (European ESG Template)), recognize where data might be strong (e.g., emissions) and where it might be limited (e.g., labor practices or governance diversity). This is especially relevant for firms using ESG benchmarks as a data source for fund-level reporting.
What Should Asset Managers Do?
While this report doesn’t introduce new requirements for asset managers, here are a few smart next steps:
- Keep an eye on updates from benchmark providers, especially those referenced in your ESG and Article 8/9 funds.
- Engage with administrators when methodologies or factor coverage appear unclear or inconsistent.
- Work across teams (compliance, reporting, product) to align on how benchmark ESG data is used in internal processes and investor disclosures.
As we celebrate Earth Day, this is a moment for asset managers to reflect not just on environmental commitments, but also on how data transparency – especially around ESG benchmarks – can help drive meaningful and measurable sustainability outcomes.
