ESMA to launch Common Supervisory Action on MiFID II sustainability requirements in 2024

ESMA has published a statement today to announce that it will launch a Common Supervisory Action (CSA) with National Competent Authorities on the integration of sustainability in firms’ suitability assessment and product governance processes and procedures in 2024.

ESMA explains that 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.

The CSA 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 (including the use of a “portfolio approach”);
  
  
• How firms specify any sustainability-related objectives a product is compatible with as part of the target market assessment of the investment product.

ESMA believes this initiative, and the related sharing of practices across NCAs, will help ensure consistent application of EU rules and enhance the protection of investors in line with ESMA’s objectives.

The CSA follows ESMA’s update of two sets of guidelines on suitability and product governance, both of which entered into application on 3 October 2023 (see our earlier summary notes here and here for more detail on the guidelines).