The European Securities and Markets Authority (ESMA) published a revised version of its Suitability Guidelines for consultation on 27 January 2022. The consultation version of the revised Suitability Guidelines now explicitly provides that ESG factors are to be taken into account in investment advice and portfolio management in the future. The final report is to be published in the third quarter.
In essence, the planned innovations provide that the three ESG dimensions, their relationship to each other and the possibility of individual weighting of the individual factors in relation to each other are explained to the client. In the following, the individual sustainability preferences as well as the individually preferred weighting of the ESG factors of the client are to be determined. Based on this, the client should finally be recommended financial instruments that correspond to his individual sustainability preferences.
Consequently, ESMA does not leave it at the fact that the individual sustainability preferences of the client are determined once and the client expresses his qualitative/quantitative preferred weighting. In the case of an ongoing business relationship, these must be regularly queried and adjusted if necessary. This procedure, which is oriented towards the “classic” procedure, makes it possible to always advise the client based on his current preferences and to adjust the portfolio accordingly.
The planned expansion of the Suitability Guidelines is accompanied by a corresponding documentation obligation as well as the obligation of the institutions to train their employees on ESG-relevant topics.
Source: WM Seminare ESG-Newsletter, Max Kirschhöfer
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