The Malta Financial Services Authority (MFSA) published the results of a thematic review of MFSA-licensed investment firms’ advisory practices on clients’ sustainability preferences and called on firms to update policies and procedures to align with EU sustainable finance rules and guidelines. The MFSA said the review points to an urgent need to improve how firms explain sustainable finance concepts, collect and assess sustainability preferences during suitability assessments, and present sustainability-related disclosures. The review combined a desktop assessment of submissions from all licensed entities providing investment advice with supervisory meetings involving a sample of firms. The MFSA found that most firms did not provide clients with sufficient information to understand sustainable finance concepts, including unclear definitions of ESG and the different types of sustainability preferences and limited use of supporting resources such as Q&A documents or explanatory notes. It also identified weaknesses in the questions used by advisers to determine clients’ sustainability preferences, instances where firms did not maintain a neutral stance and indirectly influenced clients’ preferences, and inconsistent or underdeveloped methods for assessing and investigating these preferences. In addition, the MFSA noted limited granular updates to sustainability disclosures on firms’ websites despite prior MFSA guidance. The MFSA said it has communicated observed good and poor practices and its expectations to the sector through a Dear CEO letter, highlighting the need for investment firms to make improvements in this area.

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