Réponse de l’AFG au Call for Evidence de l’ESMA sur l’intégration des préférences ESG dans la gouvernance produit

The AFG responded to ESMA’s CfE on the integration of ESG preferences in product governance and suitability assessments.
As a reminder, ESMA’s CfE was looking of industry feedback on integrating sustainability into MiFID II rules. The goal was to understand how firms are implementing these rules, gather investor insights, and track sustainable investment trends. ESMA and NCAs were collecting feedback until 15 September 2023.
Firstly, AFG expressed a positive view towards ESMA’s „portfolio approach“ but raised concerns about its suitability for institutional investors. They stressed the need to clarify the eligibility of „government bonds“ in portfolios to enhance retail investor diversification.
Regarding PAIs, AFG noted data availability issues and cautioned against expanding the list of PAI indicators at this stage. They favored flexibility introduced by ESMA but suggested limiting the consideration of PAI to those listed in Table 1 of Annex 1 of the SFDR for simplification.
The AFG emphasized the importance of educating stakeholders about sustainable finance concepts to ensure effective implementation. They also highlighted the need for a review of SFDR to assess the benefits of implementing standards and the evolving regulatory landscape concerning sustainability preferences.
More specifically, here are ESMA’s questions together with a short summary of the corresponding answers provided by the AFG:
Q18: Do you have any comment on the above practical examples?
AFG agrees with ESMA’s portfolio approach but finds the format for comparing products impractical for asset managers offering portfolio management services to institutional clients.
Q20: What are the issues that firms encountered in the application of the requirements at portfolio level?
Firms faced challenges with portfolio composition due to clients‘ multiple sustainability preferences across different asset holdings. The eligibility of government bonds as sustainable investments needs clarification to ensure a perfect match between low-risk offers and high sustainability needs.
Q21: How are clients‘ sustainability preferences gathered on the consideration of PAIs?
Clients express preferences based on groups of PAIs (climate/environmental/social/etc) in line with ESMA’s guidelines. Adding new PAI indicators at this stage could pose challenges due to a lack of data.
Q30: How are firms defining the target market for products with sustainability-related objectives?
Firms determine if the financial instrument aligns with clients‘ sustainability preferences and communicate the sustainability features to distributors. The EET facilitates the comparison between clients‘ preferences and product attributes.
Q31: What factors are considered for periodic product reviews with respect to sustainability-related objectives?
Sustainability-related goals are determined based on SFDR disclosures, generated annually.
Q33: How are firms treating products that do not consider sustainability factors in their product governance processes?
ESMA’s guidelines on product governance are followed, meaning clients with strong sustainability preferences are not recommended such funds.
Q34: Have firms noticed increased demand for financial instruments with sustainability features?
There is not enough representative data to answer this question, but evidence suggests that clients with higher financial knowledge tend to decline sustainability preferences more frequently.
Q36: Are firms facing specific issues related to data availability/data quality for financial instruments with sustainability features?
The absence of universally applicable standards and the lack of available, comparable, and reliable data pose challenges for fund manufacturers. The upcoming SFDR review offers an opportunity to improve the regulatory framework.