To help get you to the right website, please choose one of the options below

Skip Header

ESG regulation changes

Sustainability considerations and suitability.

Over the last few years, there has been a wave of legislation and regulatory changes aimed at promoting more responsible and sustainable investing. To date, this has predominantly impacted asset managers and other institutional investors. This could change as regulators contemplate investment advice and ESG considerations:

  • Within the FCA’s Climate Change and Green Finance Feedback Statement (FS19/6), the regulator specifically commented on advice:

‘In assessing the suitability of investment decisions for clients, advisors are required to gather sufficient information so that they can make recommendations to or decisions on behalf of clients that meet their investment objectives. This can include the understanding of clients’ sustainability preferences. However, it is not mandatory for ESG issues to be considered under the current suitability regime.’

  • The European Commission has expressed that it wants to make ESG investing easier across Europe. A proposed change to MiFID II legislation relates to investment suitability whereby firms will need to take account of clients’ ESG preferences when assessing their investment objectives. Further to this, the EU is proposing some supplemental wording within Regulation (EU) 2019/2088:

‘Financial advisers should disclose how they take sustainability risks into account in the selection process of the financial product that is presented to the end investors before providing the advice, regardless of the sustainability preferences of the end investors.’

The EU rules are expected to come into force at some point in 2021. It is widely anticipated that the FCA will stay close to the EU in this area.

Whether or not it becomes mandatory for advisers to take account of a client’s ESG preferences when assessing suitability, it is certainly good practice to address this within the fact-find and annual review process. We’ve made some suggestions for fact-find questions. For more on the ESG regulatory changes that have come into affect and are coming ahead check out the ESG Regulatory Timeline below.

The FCA’s strategy for positive change

Environmental, social and governance (ESG) matters are high on the regulatory agenda. Indeed, the FCA believes the financial sector has an important role to play in helping the economy adapt to a more sustainable long-term future. The regulator has therefore laid out how it intends to support the industry drive positive change.

View summary of the FCA’s ESG strategy

Sustainable investing and the advice process

Clients increasingly want to match their money with their morals. Taking account of their ESG preferences within the factfinding process is therefore good practice.


Adviser guide to sustainable investing

To aid your client discussions, we’ve produced a guide that explains all things ESG to your clients.


Sustainable investing glossary

Our glossary defines some of the more frequently-used terms in this field of investment.

Sustainable Investment Finder

Our tool is designed to make the process of selecting sustainable funds easier. Take a look at how it could help to identify potential fund solutions, whatever a client’s sustainable outlook may be.

Important Information - Please note that the value of investments and the income from them can go down as well as up so your client may get back less than they invest.

Related Fund Partner insights

Spotlight on environmental challanges:

M&G exploring targeting solutions for the planet through impact investing.

Will this be the decade for Hydrogen?

The race to 'net zero' emissions has taken a positive stepas the world's two largest emitters of carbon, China and US, have followed nearly all other major countries in signing up to the Paris climate

M&G’s commitment to a ‘net zero’ future

M&G exploring targeting solutions for the planet through impact investing.