We strongly believe that the same products must be considered as sustainable throughout all EU legislation. The requirements for sustainable products in MiFID II and the SFDR must be harmonised. The requirements for the target market assessment according to MiFID II may, not go beyond the existing requirements of the SFDR.

Also, in view of greater legal certainty and consistency, a unanimous implementation date should be set for all different pieces of legislation related to Sustainable Finance that have been adopted recently. Regarding the implementation of the MiFID II Delegated Directive we call for the inclusion of an appropriate provision. The national transposition should be completed no later than six months prior to the application deadline.

Identified Concerns

ESBG is supportive of the European Commission’s aim to create a strong framework for sustainable investment that supports the green transition and understands that the current proposals are central to this. However, as currently drafted, we have serious concerns that these proposals will, in fact, restrict customers’ access to sustainable finance by unduly limiting the range of products that banks, fund managers and insurers are able to offer them. Restricting the range of available products for end investors would seriously jeopardise the CMU objective of improving investors’ access to capital markets.

We understand the desire to include a direct reference to the Sustainable Finance Disclosures Regulation (SFDR) in MiFID II. However, it is paramount that these references, including the definition of “sustainability preferences”, are aligned with SFDR. Unfortunately, instead of simply inserting the necessary references to Article 8 products (i.e. products promoting environmental and social characteristics) and Article 9 products (i.e. products pursuing sustainability investments), the proposals introduce additional requirements for Article 8 products in MiFID II, which are confusing and inconsistent with the SFDR framework. First, the additional reference to Article 2(17) SFDR creates a new category of Article 8 products which would need to integrate additional sustainable investment considerations intended only for Article 9 products. Second, the draft delegated acts also require the consideration of principal adverse impact (PAI) for Article 8 products.

These additional requirements for Article 8 products would mean that a customer who expresses sustainability preferences cannot be offered an Article 8 product that does not meet these additional conditions, despite the product being marketed as promoting environmental or social characteristics under SFDR. This will considerably restrict the available product offering excluding many products (including some which comply with national eco-label standards) from being offered to customers who express a preference for sustainable products. It risks sustainable finance becoming a niche market, available only to customers specifically looking for an Article 9 product. This restriction placed on the distribution of sustainable products risks becoming an obstacle to the transition to a green EU economy by preventing the mainstream take-up of sustainable retail financial services products.

Also, in the recent months, different pieces of legislation related to Sustainable Finance have been adopted, each one having different applicability deadlines.

Why Policymakers Should Act

The introduction of additional requirements for Article 8 products that go beyond the requirements of the SFDR has the risk that a strategy product may be considered sustainable under the SFDR, but it is treated as unsustainable in the target market according to MiFID II e.g. if a financial market participant decides not to report on the adverse impacts on sustainability. A correction of this mismatch is needed.

The regulation in sustainable finance in the last months may cause legal uncertainty and confusion to financial market participants. A common implementation period for all interdependent regulations would help enhance legal certainty and consistency and facilitate the compliance of financial market participants.


The delegated Regulation of MiFID II is part of a broader Commission’s initiative on sustainable development. It lays the foundation for an EU framework which puts sustainability considerations at the heart of the financial system to support transforming Europe’s economy into a greener, more resilient and circular system in line with the European Green Deal objectives. The Commission announced in the 2018 Action Plan the integration of sustainability in so-called fiduciary duties in sectoral legislation.

The draft MiFID II delegated act, regarding product governance, lays down further details on the integration of sustainability preferences in the product oversight and governance process for both investment firms manufacturing financial instruments and their distributors.

Under the existing MiFID II framework, an investment firm which manufactures financial instruments for sale to clients shall maintain, operate and review a process for the approval of each financial instrument and significant adaptations of existing financial instruments before it is marketed or distributed to clients. The product approval process shall specify an identified target market of end clients within the relevant category of clients for each financial instrument and shall ensure that all relevant risks to such identified target market are assessed and that the intended distribution strategy is consistent with the identified target market. Further, Article 24(2) MiFID II requires investment firms to ensure that those financial instruments are designed to meet the needs of an identified target market of end clients within the relevant category of clients, the strategy for distribution of the financial instruments is compatible with the identified target market, and the investment firm takes reasonable steps to ensure that the financial instrument is distributed to the identified target market.

The new, draft MiFID II delegated act modifies Commission Delegated Regulation (EU) 2017/565 in the following, very central way: It integrates sustainability factors in the suitability assessment. Under the existing MiFID II framework, firms providing investment advice and portfolio management are required to obtain the necessary information about the client’s knowledge and experience in the investment field, their ability to bear losses, and objectives including the client’s risk tolerance, in order to enable the firm to provide services and products that are suitable for the client (suitability assessment). The information regarding the investment objectives of the client includes information on the length of time for which the client wishes to hold the investment, his/her preferences regarding risk taking, risk profile, and the purposes of the investment. However, the information about investment objectives generally relates to financial objectives, while non-financial objectives of the client, such as sustainability preferences, are usually not addressed. ​