The European Securities and Markets Authority has published a statement on its Common Supervisory Action on how firms integrate sustainability into MiFID II suitability assessments and product governance. The review found that firms have continued to implement the sustainability requirements, but practices remain uneven across firms and jurisdictions, prompting ESMA to set high level interim supervisory expectations on collecting and treating clients’ sustainability preferences, categorising and matching products, applying the portfolio approach, and assessing target markets. In light of ongoing revisions to the wider sustainable finance framework, ESMA has asked national competent authorities to take a proportionate approach during the transition period, prioritising dialogue with firms rather than enforcement, except in cases of clear breaches or mis-selling. The exercise was launched in October 2023 and carried out during 2024 and 2025, with 29 EU and EEA national competent authorities reviewing 245 firms, including 153 credit institutions and 89 investment firms. ESMA identified recurring issues in the way firms explain sustainability concepts to clients, capture preferences with sufficient detail and neutrality, handle clients who do not express preferences, and disclose whether multiple preferences are treated cumulatively or alternatively. It also pointed to inconsistent product categorisation because of data and disclosure limitations, differing approaches to the portfolio method, weaknesses in how firms manage the adaptation of client preferences when no matching product is available, gaps in record keeping, and uneven target market assessments, with only a few firms reflecting sustainability objectives in negative target market analysis for products that do not consider sustainability factors. ESMA said it will take the results into account in any future updates to the MiFID II Delegated Acts on sustainability and the related ESMA Guidelines on suitability and product governance, with the aim of simplifying the framework and supporting more consistent application.
European Securities and Markets Authority 2026-05-06
European Securities and Markets Authority urges proportionate supervision after MiFID II sustainability review finds uneven firm practices
The European Securities and Markets Authority has published findings from its Common Supervisory Action on integrating sustainability into MiFID II suitability assessments and product governance, identifying uneven practices across firms and jurisdictions. ESMA sets interim supervisory expectations on client preference collection, product categorisation and matching, portfolio approaches, and target market assessments, and asks national competent authorities to prioritise dialogue over enforcement during the transition, except in cases of clear breaches or mis-selling. ESMA will use the results to inform potential updates to the MiFID II Delegated Acts and ESMA Guidelines on suitability and product governance.