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ESMA Publishes Final Reports on Technical Advice on Integrating Sustainability Risks and Factors in the UCITS Directive, AIFMD and MiFID II

On May 3, the European Securities and Markets Association (ESMA) published final reports on technical advice to the European Commission (EC) on integrating sustainability risks and factors in the core EU asset management directives:

  1. the Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive;

  2. the Alternative Investment Fund Managers Directive (AIFMD); and

  3. the revised Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR).

ESMA’s reports include a number of general comments arising from the initial consultation it conducted in December 2018 on its technical proposals and its response.

ESMA also explained in a related press release that its initial consultation contained a separate paper on guidelines for disclosure requirements applicable to credit ratings, including the consideration of environmental, social and governance (ESG) factors. It expects to publish the final report of this paper by the end of July.

While it remains to be seen whether the EC will transpose all of ESMA’s recommendations into amendments to the UCITS Directive, AIFMD, MiFID II and MiFIR, it seems highly likely that the outcome of ESMA’s reports is that EU asset managers will be required to take into account sustainability risks and ESG factors as a mandatory element of selecting investments for their clients.

ESMA will now liaise with the EC in order to transform its technical advice into formal delegated legislation.

ESMA’s press release is available here.

ESMA’s final report relating to MiFID II and MiFIR is available here.

ESMA’s final report relating to the UCITS Directive and AIFMD is available here.

©2019 Katten Muchin Rosenman LLP

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John Ahern, Financial Attorney, London, Katten Law Firm
Partner

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
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Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
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Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
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Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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