France's Prudential Supervision and Resolution Authority and Financial Markets Authority set out joint supervisory approach on clients’ sustainability preferences

France's Prudential Supervision and Resolution Authority (ACPR) and the French Financial Markets Authority (AMF) published a joint, pragmatic supervisory approach to help investment advisers and life insurance distributors implement EU requirements to collect and take account of clients’ sustainability preferences when providing advice. The authorities note that, since August 2022, MiFID II and the Insurance Distribution Directive require sustainability preferences to be considered alongside the client’s investment profile. Following their work, ACPR and AMF found that most advisory journeys do not meet the regulatory requirements and that most clients do not express detailed sustainability preferences across the three MiFID II and IDD sustainability criteria, with implementation complicated by the absence of a clear and objective sustainability-based product classification. The release reiterates that intermediaries must have arrangements to precisely capture and effectively apply clients’ sustainability preferences and that products’ non-financial characteristics should be clearly identified. Practical solutions include using a simplified questionnaire with predefined sustainability preference options where an investor shows interest but does not wish to specify preferences using the regulatory criteria, provided transparency requirements are met and at least one regulatory sustainability criterion is included; and, where no product matches the client’s initial preferences and the client opts to adjust them, proposing products closest to the preferences expressed.