Huw Jones

LONDON (Reuters] – Markets are going to be challenged by concerns about Ukraine, as well as the end of COVID-19’s support, said the European Union’s Securities Watchdog on Tuesday.

In a report on risks trends, the European Securities and Markets Authority said that the threat of Russia invading Ukraine increases the volatility in certain sectors, particularly energy and commodities.

“We remain confident in our assessments of extremely high market and liquidity risk, high credit, contagion, and operational risks as well as elevated environmental risk,” ESMA declared.

“Going forward, we continue to see high risks to institutional and retail investors of further – possibly significant – market corrections.”

Russia was warned by Western nations that it will face harsh sanctions if they invade Ukraine.

Steffen Kern from ESMA is the head of risk analysis and said there were different EU exposures to Russia. An escalation could also affect commodities, such as metals, beyond just the energy sector.

Kern indicated that there were only limited exposures to Russia in both the derivatives and investment funds sectors.

Kern explained that while commodities top our monitoring agendas, cyber risks are very high. ESMA is ready and available to deal with any market disruptions.

It is monitoring the way “zombie”, or high-indebted, companies respond to rising interest rates.

The company is monitoring higher premiums and “greeniums”, bonds that boast green credentials. However, there aren’t any official sustainability standards.

ESMA has made it a top priority to combat “greenwashing”, or investments that are too green.