Published on 25 October 2023
Communiqué

Launch of the ESMA Common Supervisory Action on MiFID II sustainability requirements

On 3 October 2023, the European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, announced that it will launch a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) on the integration of sustainability in credit institutions as well as investment firms’ MiFID II suitability assessment and product governance processes and procedures in 2024: ESMA to launch Common Supervisory Action on MiFID II sustainability requirements (europa.eu).

The methodology of this CSA will be developed by ESMA and aims to ensure a common supervisory approach among NCAs.

The CSA will cover the following aspects:

  • How firms collect information on their clients’ “sustainability preferences”;
  • Which arrangements have been put in place by firms 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.

The CSA follows ESMA’s recent update of two sets of guidelines on suitability and product governance, both of which entered into application on 3 October 2023.

In the above context, the CSSF will contact a sample of supervised entities.