On September 13, the ESBG submitted its response to the European Securities and Markets Authority (ESMA) Call for Evidence on the integration of sustainability preferences in the suitability assessment and product governance arrangements, which was launched on 16 June 2023.

It is worth to recall that this Call is not intended by ESMA to open a new consultation on the content of the suitability guidelines or of the guidelines on product governance. Indeed, ESMA, together with the national competent authorities, plans to monitor the application of the guidelines on suitability and on product governance by firms and will consider complementing them with Q&As and/or will make any necessary changes during the next review of the guidelines.

ESBG therefore provided qualitative and (where possible) quantitative elements, gathered by the savings banks around Europe, with the aim to provide the Authority with a better understanding on how MiFID II requirements have been implemented and applied by its members, as well as a concrete understanding of investor experiences with the incorporation of sustainability factors within the investment’s services and portfolio management.

In general terms, the followings have emerged:

• The savings banks’ employees are well trained on sustainability issues, specifically investment advisors, sales representatives, and client facing staff.
• The savings banks have extensive organizational procedures and measures in place to ensure that potential conflicts of interest do not affect customers’ interests, including their sustainability preferences. These measures apply to investment and ancillary services, including investment advice and financial portfolio management.
• The compensation structure does not create any incentives for employees’ decisions to be influenced positively or negatively by the inclusion of sustainability preferences in the provision of investment advice or financial portfolio management.
• There is a combination of means by which banks provide information about sustainable finance to their client (physical meetings, online channels, educational brochures, bank’s website, etc.). The combination of different methods/channels is quite effective.
• Even though clients show a general understanding of sustainability aspects and why sustainability is an important aspect of their lives, they – despite all the procedures and measures put in place – do not fully understand the small differences between the various sustainable product types specified by the law and the complex and very granular (legally prescribed) query.
• In general, the complexity of the EU-rules has the effect of making retail clients less interested in expressing sustainability preferences, which is counterproductive from an ESG perspective.
• The law requirements contribute to the information overload which is already a problem in the current legal framework and is expected to worsen according to the provision of the Retail Investment Strategy.

For the most specific and technical aspects of the Call for Evidence, please, consult the ESBG response.