The European Securities and Markets Authority (Esma) is conducting a review of rule changes that incorporate sustainability considerations into suitability assessments and product governance requirements.
Esma has initiated a call for evidence on amendments to the Markets in Financial Instruments Directive II (MiFID II), which took effect in August 2022.
The revised regulations mandate firms to incorporate retail clients’ sustainability preferences into the suitability process for advisory and portfolio management services.
Firms must also establish and maintain policies and procedures to understand clients’ sustainability preferences.
The amendments stipulate that clients must receive information about the suitability assessment and its purpose to ensure firms act in the best interest of their clients.
By launching the call for evidence, Esma aims to gain insights into investor experiences and the challenges faced by firms during the implementation of MiFID II.
The regulator also seeks data on trends in the retail market for sustainable investment products and services following the rule changes.
The ongoing assessment of the amendments will inform any future revisions to Esma’s rules or guidance in this domain.
The review complements Esma’s previous efforts to address sustainable investment, including initiatives to combat greenwashing.
To mitigate the proliferation of greenwashing accusations, the regulator issued guidelines last year on the usage of sustainability and ESG-related terms in product names.
However, Esma has faced criticism for its sustainability-focused regulation.
In January, the Securities Market and Stakeholder Group criticized Esma’s guidance on the Sustainable Finance Disclosure Regulation (SFDR), citing excessive overlap between Article 8 and Article 9 funds.
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