Updated: October 2019
It would make sense for the European legislator to set a (minimum) standard that product manufacturers or
certification bodies can use. Without a common taxonomy, we support integrating ESG preferences with the
MiFID II requirements through a high-level principle-based approach. Further specifications should occur only
when the legal bases exist (i.e., when the
Taxonomy Regulation has been finalised and has
entered into force). It is also important to ensure
a level-playing field for all market participants, with
the same rules applying to similar businesses,
in particular with regard to product governance
and the advisory process.
Concerns have been expressed about the timing.
Not only is the absence of a clear view on the
outcome at level 1 on the framework to facilitate
sustainable investment (“Taxonomy”) challenging,
but the lack of legal definitions makes integrating
sustainability risks and factors problematic, both
from a Better Regulation and implementation
point of view. Currently, a lack of common market
standard that capture all relevant ESG factors in
a suitable way implies that entities use a wide
range of different labels, with different scoring
and scales. This situation makes comparison
difficult or impossible for customers. The adoption of the taxonomy will only clarify the integration of some
environmental considerations. However, the integration of other factors and risks (social and governance) will
continue to be challenging.
In this context, initial flexibility would be welcome,
but universal applicability, functionality and
comparability in particular should be ensured.
There should not be differences in terms of overall
applicability and usability of the standard between
different sectors. Otherwise, the standard will
effectively steer investment into certain assets,
while failing to have a larger impact on the market
as a whole.
The Commission plans to clarify through level 2 initiatives how asset managers, insurance companies, and investment
or insurance advisors should integrate sustainability risks and, where relevant, other sustainability factors.
The Commission will further specify:
Organisational requirements, in particular the integration of sustainability risks in the corporate governance
mechanisms within the organisation of the financial market participants and investment and insurance advisors;
Operating conditions, in particular the integration of sustainability risks within the conduct of business or
prudent person rules and due diligence requirements;
Risk management, in particular to require that risk assessments should consider both financial and relevant
sustainability risks; and
Target market assessment, in particular to ensure that sustainability factors are taken into account in the
target market assessment by investment firms manufacturing financial instruments and their distributors,
and insurance undertakings, intermediaries manufacturing insurance products for sale to customers and
EIOPA and ESMA provided technical advice in April/May 2019. The Commission will now take into account
this advice in order to update MiFID II delegated acts. EIOPA and ESMA will also provide guidelines after the
issuance of level 2 legislation.