EUROPEAN UNION: ESMA Publishes Final Report on Integrating Sustainability Risks and Factors in the UCITS Directive and the AIFMD

Friday May 3 2019

On 30^th April 2019, the European Securities and Markets Authority (ESMA) published its Final Report in relation to ‘ESMA’s technical advice to the European Commission on integrating sustainability risks and factors in the UCITS Directive and AIFMD.’

Background

On 24 July 2018, ESMA and the European Insurance and Occupational Pensions Authority (EIOPA) received a formal request from the European Commission to provide technical advice to supplement the initial package of proposals and to assist the Commission on potential amendments to, or introduction of, delegated acts under Directive 2009/65/EC (UCITS Directive), Directive 2009/138/EC (Solvency II Directive), Directive 2011/61/EU (AIFMD), Directive 2014/65/EU (MiFID II) and Directive 2016/97/EU with regard to the integration of sustainability risks and sustainability factors.

The European Commission requested ESMA and EIOPA to provide technical advice by no later than 30 April 2019.

Summary

ESMA is of the view that the principles-based approach adopted in the Technical Advice is able to achieve the policy goals relating to an effective integration of sustainability risks in the UCITS Directive and AIFMD on the one hand, while on the other hand reducing the required implementation costs by authorised entities, e.g. by allowing for an integrated risk management approach. ESMA believes that the suggested changes are proportionate in terms of costs for authorised entities, as they appear to require limited investment in relevant expertise, data and tools. The changes will achieve the intended objective of fulfilling the Commission’s mandate without imposing unnecessary burden on market participants.

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