Delegated Regulation (MiFID II) on the incorporation of sustainability factors 2021/1253

Commission Delegated Regulation (EU) 2021/1253 (MIFID II) Markets in Financial Instruments Directive II of 21 April 2021 amending Delegated Regulation (EU) 2017/565 as regards the inclusion of sustainability factors, sustainability risks and sustainability preferences in certain organizational requirements and performance conditions activities of investment companies (Text with relevance for the EEA).

This regulation enters into force on the twentieth day after its publication in the Official Journal of the European Union. It applies from 2 August 2022.

Publication date

2. 8. 2021

This Regulation amends Delegated Regulation (EU) 2017/565 with the objective to better integrate sustainability factors into the operation of investment companies. The basic motive is to support the transition to a more sustainable EU economy in accordance with the goals of the Paris Agreement and the European Green Deal.

Main points of the regulation:

• Consideration of risks threatening sustainability: Investment companies must take into account risks that could negatively affect the value of investments in terms of sustainability. This requires adequate knowledge and technical capacity.
• Identification of conflicts of interest: The regulation expands the definition of conflict of interest to include situations where the client's preference in terms of sustainability could be jeopardized.
• Recommendation of suitable financial instruments: Investment firms must be able to recommend instruments to clients that match their sustainability preferences and financial goals. They must clearly explain the differences between different types of tools with regard to their sustainability.
• Prevention of greenwashing: Investment companies may not present financial instruments as sustainable if they do not in fact meet the relevant criteria. They must keep records of the reasons why they did not recommend certain tools to clients.
• Documentation of preferences in terms of sustainability: If the client modifies his preferences in terms of sustainability, investment companies must document his decision and the reasons.

The regulation also contains definitions of key terms such as "sustainability preferences", "sustainability factors" a "sustainability risks". These definitions are taken from Regulation (EU) 2019/2088 and (EU) 2020/852 of the European Parliament and of the Council.

The Regulation enters into force 20 days after its publication in the Official Journal of the European Union and applies from 2 August 2022.