ESG regulations and their impact on advice
There are regulatory changes afoot in the world of responsible investment, which are going to have a fundamental impact on the advice process.
Since 2018, there have been over 170 ESG (environmental, social and governance) related regulatory measures proposed globally – that is more than the previous six years combined.
In 2018, the European Union also published a recommendation to make ESG investing easier across Europe.
This was through the European Commission making a formal request to the European Securities & Markets Authority (ESMA) and as a result we are about to see a raft of new regulations integrated into various directives which will drive ESG considerations further into the mainstream.
This all goes to highlight the scale of regulatory focus in this area.
What’s going to change?
Sustainability risk (the risk of fluctuation in the value of an investment due to ESG factors) is going to be integrated into MiFID II (Markets in Financial Instruments Directive), AIFMD (Alternative Investment Fund Managers Directive) and Ucits (Undertakings for the Collective Investment in Transferable Securities). The amendments to AIFMD and Ucits largely focus around improving disclosure requirements from asset owners and asset managers, but it’s in the proposed amendments to MiFID II which will have the biggest impact on advisers.
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