ESMA publishes Final Report on technical advice concerning the Prospectus Regulation

a) Background

On October 8, 2024, the EU Council adopted the Listing Act – a regulation amending, among other things, the Prospectus Regulation (EU) 2017/1129. Even though the Listing Act went into force on 4 December 2024, the majority of the provisions amending the Prospectus Regulation will actually enter into effect on 5 June 2026. Several such provisions require the adoption of level 2 measures, consisting of technical standards developed by ESMA and adopted by the EU Commission after the related legislative procedure.

On June 6, 2024, ESMA received a request for technical advice from the EU Commission on a range of topics in relation to the Prospectus Regulation. ESMA presented a draft version of its technical advice in its Consultation Paper published on October 28, 2024, followed by the final technical advice in its Final Report published on June 12, 2025.

The scope of the technical advice provided by ESMA covers, inter alia, and with a particular focus, the content and format of prospectuses. ESMA has also proposed a new building block of additional information to be included in prospectuses for non-equity securities that are offered to the public or admitted to trading on a regulated market and advertised as taking into account ESG factors or pursuing ESG objectives.

b) Key takeaways from ESMA’s advice on the standardised format and standardised sequence

The approach taken by ESMA recommends rearranging the “standard” annexes for equity and non-equity disclosures, which affects both format and content.

Mandatory sequence of information

Even though ESMA notes that the amendments to the Prospectus Regulation in respect to a standardised format requirement of prospectuses appear to apply to prospectuses for all types of non-equity securities, ESMA is of the view that a standardisation of the format would not work well for base prospectuses because of their complexity.

This results in the following key changes:

• the “standard” annexes for equity and non-equity disclosures follow the order specified in Annexes I, II and III of the Prospectus Regulation as amended by the Listing Act;
• a mandatory order of disclosures in the prospectus according to Annexes I to III of the Listing Act in conjunction with Articles 22 and 23 of the Delegated Regulation, as applicable; this, however, will only apply to stand alone prospectuses in respect of standard equity and bond issuances. Accordingly, no mandatory sequence of information requirement applies to base prospectuses for all types of debt securities (including standard fixed or floating rate bonds issued under medium term notes programmes), with the exception that, in the context of tripartite base prospectuses, registration documents of single issuers should follow the mandatory order prescribed by Annex II of the amended Prospectus Regulation, and
• the proposed disclosure in the “standard” equity and non-equity annexes is generally reduced to that required by the current EU Growth prospectus annexes, which are used as a benchmark model but occasionally goes beyond that disclosure in relation to non-equity.

Periods for financial information

Further, the period that financial information in the registration document should cover is reduced from three to two years for equity prospectuses and from two years to one year for debt prospectuses. On this point, in the initial Consultation Paper, ESMA highlights the importance, for the sake of practicality, of this reference to the “last financial year” not being understood on the basis of a calendar year or in months. In particular because a prospectus prepared in the first quarter of 2025 may only be able to include full audited annual financial information from 2023. Accordingly, ESMA has sought to ensure that no changes were made to items such as the age of financial information in the “standard” non-equity annex that would create associated issues. Nevertheless, in the Final Report ESMA acknowledged that the meaning of “last financial year” could be covered by a Q&A In future. In relation to the reduction of the minimum period for financial information ESMA acknowledged in the Final Report that the reduced time periods may be too short in certain cases and noted that issuers may voluntarily include additional information if required in view of Article 6 of the Prospectus Regulation.

Streamlined disclosure requirements for non-equity securities and single non-equity disclosure framework

ESMA acknowledged the overall aim to streamline, standardize or reduce certain disclosure in base prospectuses as much as possible, but the attempt to fulfil these various objectives in a single disclosure framework may, in some cases, create significant difficulties. The ESMA proposed Annexes for non-equity securities therefore attempt to use the framework for the disclosure of wholesale transactions as a basis for future prospectuses for non-equity securities, while also using the existing Annexes for growth prospectuses for non-equity securities as a model. A challenge, among others, is that the different securities descriptions serve different functions. For example, the securities description for non-equity securities for wholesale places more emphasis on admission details, while the securities description for non-equity EU growth places more emphasis on offers. That said, ESMA has proposed a single non-equity disclosure framework which attempts to take into account all elements of the Listing Act and the European Commission's call for advice.

For this purpose, ESMA merged the existing Annexes 6 and 7 for retail and wholesale registration documents as well as Annexes 14 and 15 for retail and wholesale securities into a new uniform Annex 6 for non-equity registration documents and a new uniform Annex 13 securities note, each covering wholesale and retail issuances. With the proposal of such a single non-equity disclosure framework , ESMA has sought to reflect the instruction to take account of the retail market and the order of the information in accordance with Annexes II and III of the Listing Act. In the Final Report, ESMA followed the feedback from many respondents to the consultation and introduced additional changes to distinguish clearly between retail and wholesale disclosure.

Plain language

ESMA also noted in the Final Report the inherent challenges to introducing “plain language” requirements, primarily because this would be interpreted very differently with respect to the various EU languages. It indicated that further work on this topic may be explored in the future, without giving any specific commitments. This means that ESMA based common plain language requirements seem to be far away at this point in time. Divergence in the application of this requirement by national competent authorities will therefore remain.

Specific aspects for equity securities

ESMA maintains the proposals to delete the capitalisation and indebtedness and the Operating and Financial Review (comparable to Management’s Discussion and Analysis) section in equity registration documents and to introduce a 300 page limit for share prospectuses, creating greater divergence to market standards of offering documents pertaining to private placements to US investors in reliance of Rule 144A under the U.S. Securities Act of 1933.

Requirements dropped in the Final Report

The following proposals related to the content and format of prospectuses contained in the Consultation Paper have been dropped in the Final Report, and are accordingly no longer proposed:

• introduction of a short cover note regarding the subject matter of the registration document or prospectus;
• proposal to allow non-equity issuers to provide entity level sustainability information in the registration document via an electronic link to their website;
• required disclosure of key performance indicators in non-equity registration documents targeting retail investors;
• required disclosure of arrangements that may prevent a change in control of the issuer in non-equity registration documents; and
• redundant cross-references.

Finally, ESMA deleted the specific tax disclosure requirement for non-equity securities where the proposed investment attracted a specific tax regime as well as the tax warning disclosure in prospectuses targeting wholesale investors.

c) Key takeaways from ESMA’s advice on the disclosure requirements for non-equity securities advertised as taking into account ESG factors or pursuing ESG objectives

ESMA has chosen to take its Public Statement on sustainability disclosure in prospectuses as a starting point for its technical advice since it already created a more uniform level of disclosure in prospectuses. Only in a few cases, ESMA’s proposal goes beyond the requirements in the Public Statement. Nevertheless, in its final advice ESMA has made several amendments to the initially proposed disclosure requirements to address respondents' concerns. In particular, ESMA reduced the complexity of Annex 21 and gave helpful explanations in the Final Report as to the expected content of sustainability related product disclosures.

To put this into practice, ESMA has developed Annex 21, which serves as a so-called “building block” and is to be used in combination with the other applicable annexes for non-equity securities.

New definitions of ‘use of proceeds’ bonds and sustainability-linked bonds, interaction with the European Green Bond Regulation, Scope

Several of the requirements in Annex 21 relate specifically to so-called ‘use of proceeds’ bonds (e.g. green bonds or social bonds) and sustainability-linked bonds, including new definitions for both types of bonds to help ensure legal certainty.

As proposed in the Final Report:

• "use of proceeds bond’ means non-equity securities whose proceeds or an equivalent amount are allocated to environmental and/or social projects or activities, and
• "sustainability linked bond" means non equity-securities for which the financial and/or structural characteristics can vary depending on whether the issuer achieves predefined ESG objectives.

Both definitions have been re-drafted by ESMA in its final advice following market feedback in the consultation.

In this regard, to avoid any misperceptions, ESMA clarifies by way of introducing new Article 21a in the Delegated Regulation that Annex 21 should also cover European Green Bonds (EU GB) under the EU Green Bond Regulation and securities that will be issued by using the voluntary pre-issuance templates of the EU Green Bond Regulation.

In the Final Report, ESMA:

• rejected further alignment of these new definitions to defined terms contained in the EU Green Bond Regulation because this would exclude securities with social and government components;
• explicitly endorsed the notion that Annex 21 ought to apply to all types of securities with an ESG component or objective and dismissed concerns that the related disclosure requirements could impede product innovation; and
• clarified in respect of derivative structured products that Annex 21 requires additional information in respect of the referenced underlying(s) where that underlying is material for the assessment of the ESG factors or ESG objectives (e.g. if advertised as consistent with the ESG objectives of the related securities).

EuGB factsheets

As to the EU Green Bond Standard, ESMA proposed to amend Article 26 of the Delegated Regulation so that disclosure in EuGB factsheets is – by way of an exception to the usual approach on incorporation by reference – classified as Category C information for base prospectuses and can therefore be incorporated by reference into the final terms, i.e. it can be included by reference on an issuance specific basis and therefore at a point in time after the approval and publication of the base prospectus. In the Final Report, ESMA also proposed that the disclosure contained in EuGB factsheets should satisfy the disclosure requirements of Annex 21 if it is incorporated by reference into the prospectus as a whole (including by way of incorporation by reference in the final terms) pursuant to Article 13(1a)(a) of the Prospectus Regulation; however, ESG-related risk factors relating to such securities would need to be disclosed in the risk factors section of the prospectus and the necessary information required by Article 6(1) of the Prospectus Regulation would still apply to such prospectuses and national competent authorities would need to be able to determine whether the prospectuses comply with the relevant standards of completeness, comprehensibility and consistency necessary for approval.

Risk factors

In relation to ESG-related risk factors, in its Final Report ESMA points out that no specific requirements will be made in Annex 21 but emphasises that it anticipates risk factors in respect of Annex 21 aspects to be included in prospectuses which then must meet the general requirements set out in Article 16 of the Prospectus Regulation. ESMA also anticipates that the risk description in prospectuses must include risks "…concerning allocation, management of proceeds as well as the viability and achievement of the sustainable project(s) in prospectuses relating to use of proceeds bonds."

Category A and B requirements under Annex 21

Under Annex 21, many of the disclosures to be made in base prospectuses will fall under Category A or B and therefore cannot be made by means of additions in the final terms only. Consequently, a wide range of information gathering takes place at the base prospectus level.

Voluntary pre-issuance disclosures under the EU Green Bond Regulation

ESMA has also considered exclusively relying on the voluntary pre-issuance disclosure templates which still have to be developed under the European Green Bond Regulation in an effort to try to alleviate the burden on issuers. However, ESMA is of the view that the use of such voluntary disclosure templates should not result in an exemption from the Annex 21 requirements for various reasons. However, ESMA confirmed that it will publish an RTS in accordance with Article 19(4) Prospectus Regulation to add the optional pre-issuance disclosure to the list of documents that can be incorporated by reference into prospectuses in accordance with Article 19(1) Prospectus Regulation.

Harmonisation with other disclosure frameworks in EU legal acts

Since the Sustainable Finance Disclosure Regulation (SFDR) is also currently being reviewed, ESMA's final advice is that it is not appropriate to align the disclosure requirements under the Prospectus Regulation with the SFDR or the MiFID II investor preferences at this time is also significant. Therefore, it is still too early to make statements on consistency between ESG disclosures for non-equity securities and sustainability preferences and thus ESMA's advice on the disclosure requirements for non-equity securities is that advertising an ESG component or having an ESG objective under the Prospectus Regulation does not yet align with the disclosure requirements under the SFDR.

The term “advertised”, scope of Annex 21

A further significant point brought up by ESMA in the Final Report is that, in its view, the term “advertised” in the context of Article 21 ought to be read broadly so as to include both written and oral communications, including roadshows. Still, ESMA refrained from providing formal guidance in this regard and noted this would be more appropriately placed in a future Q&A. This means in practice, that the scope of Annex 21 will cover all kinds of non-equity securities that are advertised as taking into account ESG factors or pursuing ESG objectives and, accordingly, is not only limited to "use of proceeds" bonds and sustainability-linked bonds.

On the other hand, ESMA noted it would not expect that the publication of corporate/entity-level disclosures which do not concern specific securities offerings to trigger the application of Annex 21. In relation to advertisements ESMA also emphasises in its Final Report that it is important to ensure that "… any advertisements published in relation to the non-equity securities do not reflect a different ESG-profile than in the prospectus…".

Minimum disclosure requirements

The main part of the minimum disclosure requirements in Annex 21 is set out in Section 1. In line with its Public Statement on sustainability disclosure in prospectuses ESMA made clear that the basis of any sustainable disclosure should be a “…clear and comprehensive explanation to help investors understand the ESG factors taken into account by the securities and/or ESG objectives pursued by the securities. This explanation should be unambiguous, fact-based…”

This includes in respect of securities that are advertised as complying with the EU Taxonomy (or a third country taxonomy) that the disclosure clearly states that the EU Taxonomy Regulation applies and how the criteria in Article 3 of the EU Taxonomy are met, and where relevant, identify any elements that are not met. In respect of sustainable securities that are based on a market standard or label, the disclosure should identify the market standard or label and state how the criteria in that standard or label are met and, where relevant, identify any elements that are not met.

ESMA reduced the complexity of requirements in Section 1 of Annex 21 as compared to the proposal in the Consultation Paper and noted in the Final Report that it would usually expect that the prospectus describes the applicable sustainability frameworks and product policies in respect of this requirement.

Accordingly, Section 1 of Annex 21 does not at all prescribe any sustainability requirements on the securities as such.

Link to frameworks, market standards and reports

ESMA also proposed to allow issuers to include an electronic link to the relevant framework, market standard, label, or taxonomy, with a disclaimer that it does not form part of the prospectus unless incorporated by reference. In this regard ESMA noted that incorporation by reference would only be feasible in limited cases given the exclusive list of information that can be incorporated by reference in Article 19 of the Prospectus Regulation. However, based on the current approval practices of national competent authorities, it should be taken into account how important the information not included in the prospectus is for investors, and corresponding disclaimers in the prospectuses in respect of such information not being part of the prospectus must be carefully tailored accordingly.

Other information requirements

Sections 2 and 3 of Annex 21 foresee some more specific requirements for use of proceeds bonds and sustainability-linked bonds. Pursuant to Section 6 of Annex 21, specific information requirements apply in respect of ESG ratings and specific reviews or reports in respect of ESG factors or ESG objectives but only if and to the extent used in connection with the advertisement of the respective securities.

Material underlyings

Section 4 of Annex 21 is important for structured products that are covered by the scope of Annex 21. It prescribes additional information in respect of the underlying(s) of the securities to the extent that an underlying is material for the assessment of the ESG factors and objectives.

The underlying specific information is categorised as Category C information for base prospectuses, i.e. it must only be provided in the final terms. The required confirmation that the sustainability features are material for the assessment of the ESG factors taken into account by the securities and/or the ESG objectives pursued by the securities is, however, classified as category B information.

ESMA has not given any guidance on this materiality test in respect of the underlying or presented any view in what cases this test should be deemed to be fulfilled. In practice, the materiality test will likely have to be performed on the basis of the product policy of an issuer and the specific marketing material to be prepared at a later stage. Accordingly, this materiality test must be made prior to the issuance of the respective security. It can therefore be expected that placeholders will likely be required by approval authorities to be included in the form of final terms of base prospectuses for sustainable structured products unless it is possible to convince the approval authority that – based on the existing product policy of an issuer – the underlying never has a material function in connection with the ESG factors or objectives of the securities to be issued.

d) Next Steps

As the Final Report has already been submitted to the Commission, the Commission will now take a decision on whether to adopt ESMA’s proposals by updating Commission Delegated Regulation 2019/980.