The European Securities and Markets Authority (Esma), the EU’s financial markets regulator and supervisor, on Tuesday said it plans a comprehensive review next year of industry efforts to integrate sustainability in investment firms’ suitability assessment and product governance processes and procedures.
The review will be shaped as a Common Supervisory Action, or CSA, in which it closely involves national supervisors such as the CSSF in Luxembourg.
“The goal of the CSA will be to assess the progress made by intermediaries in the application of the key sustainability requirements, which entered into application in 2022 following the amendments to the MiFID II Delegated Acts,” Esma said.
The Esma review will cover the following aspects:
- How firms collect information on their clients’ “sustainability preferences”;
- Which arrangements firms have put in place to understand and correctly categorise investment products with sustainability factors for the purpose of the suitability assessment;
- How firms ensure the suitability of an investment with respect to sustainability;
- How firms specify any sustainability-related objectives a product is compatible with as part of the target market assessment of the investment product.
Esma said it believes this initiative, and the related sharing of practices across national supervisors, will help ensure consistent application of EU rules and enhance the protection of investors in line with its objectives.