MiFID II confusion for EU wealth managers

A study of 210 European wealth managers, managing over €3.2 trillion in assets, has found more than one in 12 (13 per cent) are uncertain about ESG requirements under rapidly-growing EU financial regulation.

Behavioural finance organisation Oxford Risk’s findings highlight a significant gap in understanding the Markets in Financial Instruments Directive II (MiFID II) requirements, which mandate incorporating clients’ ESG preferences into suitability assessments.

Changes made to MiFID II in August 2022, require investment advisors and portfolio managers to incorporate clients’ sustainability (or ESG) preferences into their suitability assessments and apply to all forms of investment advice as well as portfolio management.

Recent geopolitical events and changing EU taxonomy definitions have further compounded this complexity. ESG is a controversial phrase in countries such as the US, escalated by the energy price surges following the Russian invasion of Ukraine in February 2022. Boundaries and terminology are also of concern: The EU amended its taxonomy for “green” energy to include nuclear and gas – putting it at odds with environmental groups.

“It’s concerning just how many wealth managers still are not entirely up to speed with MiFID II requirements, given how long it’s been in force,” James Pereira-Stubbs, chief client officer, Oxford Risk, said.

Indeed, just two out of five (38%) are fully aware of and strongly understand the European Securities and Markets Authority (EMSA) MiFID directives on sustainability (ESG) assessments.

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