On 21 April the EU confirmed the introduction of ‘sustainability preferences’ under MIFID II, as a top up to the suitability assessment.
This means that EU investment advisers (financial advisers advising on investments) will be required to obtain information not only about the client’s investment knowledge and experience, ability to bear losses and risk tolerance as part of the suitability assessment, but also about their sustainability preferences. This will ensure that sustainability considerations are taken into account on a systematic basis when advisers assess the range of financial products in their recommendations to clients.
HM Treasury and the FCA, due to the UK leaving the EU, will not be automatically onboarding any new MIFID regulation or directives. However, they have clearly stated that they are looking to at least match the ambition of the EU. In the recent letter to the FCA, HM Treasury indicated that the future objectives of the FCA must be aligned to mobilising private capital (investment and pension funds) to meet the Net Carbon targets set by the UK Government by 2050.
The response from the FCA came through a virtual town hall meeting on 13 April where they stated:
“Financial markets will have a crucial role to play in making the transition to a carbon neutral UK, and as the supervisor of these markets, we intend to play our part.”
The direction of travel in this space is indicating that there is every probability that the UK (FCA) follow a very similar path, therefore advisers may want to start or enhance the process of embedding Responsible Investment into their investment strategies
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