ESMA proposes burdensome “sustainability preferences” revisions to its Suitability Guidelines

With the integration of sustainability preferences into MiFID II suitability requirements effective from August this year, ESMA has today released its proposed amendments to its Suitability Guidelines to give more colour on how it expects sustainability considerations to be built in to the suitability process.

Unfortunately, the proposed amendments increase the anticipated burden on asset managers and those providing investment advice, spelling out an uplift to the explanations and communications required with clients, to the individual client tailoring expected and in the record keeping burden faced by those firms.

Whilst the proposed amendments mainly focus on sustainability preferences, ESMA also suggests changes in the suitability process more generally, drawing on good and bad practices that have been observed since 2018, when the current version of the guidelines were published.

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