Will the EU Commission Successfully Integrate Sustainability Risks and Factors in the Investor Protection Regime? A Research Agenda

Sustainability 2019, 11, 6292

23 Pages Posted: 19 Dec 2019

See all articles by Michele Siri

Michele Siri

University of Genoa - Law Department; European Banking Institute; EUSFIL Jean Monnet Center of Excellence on Sustainable Finance and Law

Shanshan Zhu

University of Genoa - Law School; EUSFIL Jean Monnet Centre of Excellence

Date Written: November 8, 2019

Abstract

Building a common EU framework for sustainable finance undoubtedly implies the integration of sound and sustainable processes and skills across the whole structure and governance of financial institutions. Consequently, a new financial paradigm is going to be needed, which will require the strengthening of investor care and protection, so contributing to the restoration of trust in the financial sector. In particular, on 18 December 2018, the European Securities and Markets Authority (ESMA) launched two public consultations on draft technical advice for the integration of sustainability risks and factors into the Directive on Markets in Financial Instruments (MiFID), the Alternative Investment Fund Managers Directive (AIFMD), and the Undertakings for Collective Investment in Transferable Securities Directive (UCITS) regimes, with the aim to clarify the so-called fiduciary duties and to increase transparency in the financial services industry. However, the success of the EU initiatives on investor protection regulation may be seriously endangered by the existence of many challenges, weaknesses, and contradictions raised by economists and stakeholders in relation to the definition of sustainability, ESG data availability and reliability, the development of an EU taxonomy, conflicts of interest, product governance, and suitability assessment. This paper starts by briefly analyzing the recent developments of the regulation of sustainable finance at the global level, then offers a more detailed view on the establishment of a common regime on sustainable finance in the EU, with particular reference to the action plan ‘Financing Sustainable Growth’. Then, it examines the recent proposals for regulation on sustainable finance, specifically considering the barriers to the integration of sustainability risks and factors in the EU investor protection regulation—with particular reference to investment services—with respect to its four main dimensions: (1) disclosure of product information, (2) conduct of business (COB) rules, (3) product governance and intervention, and (4) financial education. The paper concludes that the EU reforming proposals, though admirable, risk oversimplifying a complex issue that cannot be easily solved without considering its practical implications on each category of financial operators in the performance of different financial services.

Keywords: European Union, MiFID II, sustainable finance, investor protection, ESG investing, EU law, non-financial reporting

JEL Classification: K22, K32

Suggested Citation

Siri, Michele and Zhu, Shanshan, Will the EU Commission Successfully Integrate Sustainability Risks and Factors in the Investor Protection Regime? A Research Agenda (November 8, 2019). Sustainability 2019, 11, 6292, Available at SSRN: https://ssrn.com/abstract=3497402

Michele Siri (Contact Author)

University of Genoa - Law Department ( email )

Genoa
Italy

HOME PAGE: http://unige.it/en/

European Banking Institute ( email )

Frankfurt
Germany

HOME PAGE: http://ebi-europa.eu/members/fellow-academic-members/

EUSFIL Jean Monnet Center of Excellence on Sustainable Finance and Law ( email )

Italy

HOME PAGE: http://www.eusfil.eu

Shanshan Zhu

University of Genoa - Law School ( email )

Via Balbi 22, 6th floor
Genoa, Genoa 16100
Italy

EUSFIL Jean Monnet Centre of Excellence ( email )

Via Balbi
Genoa
Italy

HOME PAGE: http://www.eusfil.eu

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