Message from the Managing Director
I am pleased to present this third edition of the ESM summary report on environmental, social, and governance (ESG) activities.
Over the past year, the landscape of ESG investing has experienced increased scrutiny and changing priorities. While ESG considerations have become increasingly mainstream over recent years, there is now a more measured and critical approach emerging in certain markets. Factors such as regulatory developments, calls for greater transparency, and concerns about the effectiveness of ESG strategies have led investors and stakeholders to seek clearer evidence of impact and accountability.
Despite these evolving dynamics, the fundamental importance of ESG remains clear. The past year’s record-breaking temperatures and extreme weather events have underscored the urgency of sustainable finance, which strengthens the ESM’s commitment to take into account climate change-related objectives in its financial operations.
Equally important, the ESM’s social commitments focus on fostering financial stability and supporting stakeholder confidence across member states. On governance, the ESM prioritises transparency, rigorous risk management, and adherence to international standards to meet regulatory and investor expectations.
For the ESM, ESG considerations are not merely a trend, but a core element of our mission to ensure financial stability and resilience in the euro area and are fully integrated into the institution’s strategic priorities. By embedding ESG considerations into our operations and investment strategies, we aim to support the transition to a more sustainable and inclusive economy, while maintaining the trust of our stakeholders and fulfilling our mandate.
To this end, the past year marked significant progress in aligning our investment portfolio with these objectives. We have intensified our efforts to integrate ESG principles, particularly in response to the growing demand for sustainable financial instruments. The ESM increased its exposure to ESG-labelled bonds, holding €7.4 billion on a markedto- market basis by end-2024, up from €5.2 billion in 2023. Of this total, €7.3 billion adhered to the principles and guidelines established by the International Capital Market Association.
Building on these efforts, the ESM has also expanded its engagement in global forums to advance sustainable finance and climate resilience. In 2024, we took a significant step by participating in international discussions to share our expertise and collaborate with global stakeholders. For the first time, the ESM attended a United Nations Climate Change Conference (COP29) in October 2024 in Baku, Azerbaijan. The annual conference gathers world leaders, scientists, and activists to discuss and agree on actions to address the climate crisis. This year’s conference focused on climate finance, a topic very close to ESM’s work given the implications for macroeconomic and financial stability.
I had the privilege of leading the ESM delegation in Baku, where we engaged with the Luxembourg Finance Minister and the European Investment Bank, and co-organised a panel on European institutional perspectives on moving towards sustainable finance. The ESM delegation also participated in other panels and numerous bilateral meetings to share its insights, strategies, and approaches on critical issues.
The examples above highlight our commitment to embedding ESG principles across our operations. The following pages of this report provide a comprehensive overview of our progress, challenges, and aspirations in fostering financial stability and sustainability. We invite our stakeholders to explore these insights, which outline our achievements and our vision for a future where resilience and sustainability are seamlessly integrated.
Pierre Gramegna
Managing Director, ESM
Chief Executive Officer, EFSF