Fund managers grapple with new MiFID II ‘sustainability preferences’ requirements

August 1, 2022
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In this article published in Sustainable Views, a new publication by FT Specialist, Enrique Glotzer discusses how the recent Markets in Financial Instruments Directive (MiFID II) impacts fund managers in their efforts for sustainability and ESG.

Enrique notes it is unsurprising many fund managers have not been ready to submit their EET by the deadline – many fund managers will not have the internal capabilities and resources to navigate the high level of complexity associated with the MiFID II regulations and complete the templates with many layers of requirements and hundreds of fields. Fund managers may also not have the needed frameworks in place for further upcoming changes such as EU Taxonomy compliance.

He also says that another major challenge is the overall availability of robust ESG data investments and ESG factors, for example, carbon emissions across the full value chain of operations. Subsequently, “fund managers need to use this incomplete data to develop internal processes to verify the various ESG factors for these investments and build the management of sustainability risk into them”.

However, he says firms need to develop a robust in-house ESG strategy including a good understanding of the materiality of issues for their investments and customers, which will require new investment decision processes and potentially a broader product offering. customers. “Firms that have developed a robust ESG strategy, communication plans, and a compliance framework will not only be best placed to meet the current and future regulatory requirement but will also gain a competitive advantage over time,” he concludes.