On October 7, ISDA submitted a response to the European Securities and Markets Authority (ESMA) on the review of the second Markets in Financial Instruments Directive (MIFID II) product governance rules, which touched upon derivatives-related issues. ISDA encouraged ESMA to develop specific environmental, social and governance (ESG) classification guidelines for derivatives and structured products to allow financial institutions to implement MIFID ESG obligations without undue regulatory risks. In particular, the response singled out equity and debt derivatives as eligible to qualify into the MIFID ESG categories and explained that other types of derivatives would not be applicable to taxonomy assessments, albeit forming part of sustainable investment strategies. ISDA welcomed the possibility of using ‘equivalent data’ for missing official data and urged ESMA to detail the definition of equivalent data from external providers at the European level to avoid market fragmentation in Europe. The response also asked for a distinction to be made when determining the target markets for over-the-counter (OTC) derivatives between standardized OTC derivatives and ‘case-by-case’ derivatives, given that a clustering approach can be suitable for the former as opposed to the latter, which by their nature are bespoke products intended for a unique transaction.