The Norwegian Financial Supervisory Authority has published the results of a desk-based thematic review, conducted as part of the European Securities and Markets Authority’s Common Supervisory Action, on how investment firms comply with MiFID II sustainability requirements for suitability assessments and product governance. The review found wide differences in how firms explain, collect and apply clients’ sustainability preferences and how sustainability-related objectives are reflected in target market assessments, and a standard findings letter was sent to the nine participating firms: DNB Bank ASA, Fokus Kapitalforvaltning AS, Grieg Investor AS, Norne Securities AS, Norse Securities AS, Prize Capital Markets AS, Sparebank 1 SMN, Sparebanken Norge (Sparebanken Vest) and Söderberg & Partners Wealth Management AS. Most firms were assessed as having improvement needs in explaining key sustainability concepts and guiding clients, with examples ranging from routines not being followed in client conversations to reliance on lengthy written disclosures without follow-up and, in a few cases, missing or very weak procedures. Several firms’ suitability questionnaires were not viewed as sufficiently neutral and balanced, including questions framed to emphasise only negative or only positive aspects, and some approaches appeared tailored to the firm’s own product offering or sustainability strategy rather than the MiFID II definition of sustainability preferences. Collection of preferences varied materially across the three MiFID II categories (taxonomy-aligned investments, SFDR “sustainable investments”, and consideration of principal adverse impacts), with some firms not asking for minimum shares for categories (a) and (b) or using very low standardised thresholds (typically 2% or 5%), which the supervisor considered insufficient and not aligned with regulatory expectations. Product governance practices also differed significantly, and the supervisor concluded that most firms did not meet regulatory requirements for incorporating sustainability-related goals in target market assessments, citing superficial approaches such as reliance solely on SFDR product classification (Articles 6/8/9), use of external ESG scores that measure sustainability risk rather than product sustainability characteristics, limited documentation, or no sustainability assessment at target market level. Results from the thematic work were reported to ESMA in June 2025 and the firms are anonymised in the report; the supervisor did not issue individual supervisory reports and considers the thematic review concluded. It also noted that EU work to simplify parts of sustainability reporting and disclosure does not imply immediate changes to the MiFID II suitability and product governance requirements assessed in this review.
Norwegian Finanstilsynet 2025-10-28
Norwegian Financial Supervisory Authority finds significant variation and shortcomings in MiFID II sustainability compliance at nine investment firms
The Norwegian Financial Supervisory Authority's review of investment firms' compliance with MiFID II sustainability requirements found significant discrepancies in handling clients' sustainability preferences and target market assessments. Most firms need improvement in explaining sustainability concepts, with biased suitability questionnaires and inadequate preference collection. Many firms failed to meet regulatory standards for incorporating sustainability goals in product governance, often using superficial methods.