Hugh Jones
LONDON (Reuters) – The European Union’s market watchdog said on Thursday that EU market watchdogs will oversee EU markets after inflation sparked by Russia’s invasion of Ukraine threatened the market’s ability to deal with the crisis Institutions are on red alert for contagion.
The European Securities and Markets Authority (ESMA) gave the market an overall red risk rating in its latest Risk Monitor report, with only credit risk and environmental risk flashing amber and no green .
It said that operational risks such as contagion and liquidity are very high.
The war in Ukraine has deeply affected financial markets, leading to rapid price increases and volatility, especially in commodities, against a backdrop of already rising inflation.
“These present liquidity risks to exposed counterparties and demonstrate the continued importance of close monitoring to ensure an orderly market, which is a core objective of the market. ESMA,” Verena, chair of the regulator Ross said in a statement.
As European EU countries revert to more polluting energy sources such as coal to reduce reliance on Russian energy sources, EU investment funds tout their environmental, social and governance (ESG) credentials, appearing twice in March Net outflow for the first time in years.
But overall, the fundamental shift towards ESG investing continues, with ESG assets representing an average of
in the second quarter of% , which is lower than 10% compared to the first half of 10.
Russia’s invasion of Ukraine raises questions about the compatibility of sustainable investment practices with financing non-democratic regimes or weak democracies, ESMA added.
“The Russian invasion highlights the ‘S’ (social) pillar in ESG investing and its clear link to the ‘E’ pillar,” ESMA said.
In the first half of 2022, there was also a sharp drop in crypto asset prices and liquidity, meaning investors with large positions had limited options to exit, ESMA said .
