In 2015, the Paris Agreement was signed, which aims to reinforce the international response to the threat of Climate change and establishes the objective of a maximum temperature increase of 2ºC in the XXI century relative to preindustrial levels. In the same year, all United Nations Member States adopted the Sustainable Development Agenda for 2030.

Taking into account the objective of the Paris Agreement, the EC presented the European Green Deal in December 2019, which sets the goal of no net greenhouse gas emissions from 2050. This target requires that clear signals are given to investors with regard to their investments to avoid stranded assets and to raise sustainable finance.
 


Amendments to the Delegated Acts on sustainability

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In this context, financial firms need to integrate sustainability factors and risks into their internal procedures, investment management and their investment advice to clients. In this sense, the EC has published six amending Delegated Acts that will ensure that financial firms, e.g. advisers, asset managers or insurers, include sustainability in their procedures and their investment advice to clients.

Executive summary
The EC has published six amending Delegated Acts with impact on regulations related to MiFID II, AIFM, UCITS, Solvency II, and IDD.  These amendments will ensure that non- banks financial firms, e.g. advisers, asset managers or insurers, include sustainability in their procedures and their investment advice to clients.

Main content
This Technical Note summarises the main aspects of these Delegated Acts:

  • Amendments with an impact on MiFID II. Investment firms should consider sustainability factors in the process of monitoring and governance of their products and services. Investment firms should also take into account the clients preferences on investment and portfolio management.
  • Amendments with impact on AIFMD. The obligations of Alternative Investment Fund Managers to integrate sustainability risks are clarified. These obligations concern, among others, risk management policies or conflicts of interest arising from the management of an investment fund.
  • Amendments with an impact on the UCITS Directive. The obligations of Collective Investment in Transferable Securities with regard to the integration of sustainability risks and sustainability issues are clarified. These obligations concern, among others, the qualifications and experience of its staff or the general investment policy and risk management policy.
  • Amendments with an impact on Solvency II. The amendments clarify that the system of governance of insurance and reinsurance undertakings and the assessment of their overall solvency needs must reflect sustainability risks. This has implications, for example, for the calculation of technical provisions.
  • Changes with an impact on IDD. The amendments incorporate sustainability risks into product oversight and governance requirements and conflict of interest rules for insurance undertakings and insurance distributors.

Compliance with the amendments to the Delegated Acts on sustainability has implications for governance, policies and procedures, risk management, reporting and systems.

Management Solutions has an expert working group that supports its clients in the development and implementation of the sustainability framework with a top-down approach (from general to specific) in each of the following areas: i) Strategy, Governance and Culture; ii) Self-assessment of sustainability; iii) Sustainable Business Development; iv) Risks; v) Data and Technology; and vi) Reporting.

Download the technical note by click​ing here (technical note also available in spanish).