EFAMA responses to ​European Commission consultations on MiFID, UCITS and AIFMD Delegated Acts​

10 July 2020

EFAMA has always firmly supported the creation of a robust  framework for sustainable investing which facilitates the transition to a more sustainable European economy. In this context, the association sees the Commission's work on integrating sustainability considerations as an essential milestone that will further encourage the availability of ESG products to European investors.  

“The question European policymakers are now faced with, is whether to create a standardised tick-the-box system - putting sustainability in a niche - or to opt for a flexible approach promoting dynamic developments in sustainable investing. We would definitely advise for the latter as a flexible approach will foster a sustainable European economy", stated Tanguy van de Werve, EFAMA Director General. 

The MiFID II, UCITS and AIFMD Delegated Acts should ensure that sustainable investing becomes mainstream. However, the Commission's proposals in their current state will not achieve this goal, highlights the association.  

EFAMA is therefore insisting on the following essential adjustments: 

• MiFID must be fully aligned with the Sustainable Finance Disclosures Regulation (SFDR) with a clear distinction between Article 8 products (i.e. products promoting environmental and social characteristics, aka ESG strategy products) and Article 9 products (i.e. products pursuing sustainability investments). Only the latter should be required to invest in sustainable investments. One must avoid a situation in which a client who expresses sustainability preferences cannot be offered an Article 8 product while the very same product can be marketed as promoting environmental or social characteristics under SFDR.
  
  
  ​MiFID must not go beyond the existing SFDR requirements regarding principal adverse impact (PAI). The proposed delegated acts are significantly extending the scope of PAI at product-level that was previously agreed by European co-legislators. 

• EFAMA supports the integration of sustainability risks as part of the risk management policy at fund level in UCITS and AIFMD, but  sees no reason to introduce this specific risk in the context of provisions related to general organisational due diligence or conflict of interest requirements, which by nature are not risks-related. 

• Finally, the sp​ecific requirements for sustainability risk management underscore the need for such risk management to be based on reliable information. While EFAMA hopes that changes to the NFDR (Non-Financial Reporting Directive) will improve the availability and reliability of ESG data, the NFRD will not be in place in time for these UCITS and AIFMD amended rules to take effect. Until at least 2023-2024, disclosures by issuers will be completed on a non-standardised 'comply and explain' basis. Until the revised NFRD is in place, EFAMA insists that asset managers should be allowed to assess sustainability risks also on a qualitative basis when firms set up their risk management frameworks.  
  

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