Sustainable Finance: Your Financial Advisor Needs to Ask You Questions

Sustainable Finance: Your Financial Advisor Needs to Ask You Questions



Soon, your financial intermediary will add to the long list of questions he must ask you to define your investor profile, the question of your preferences in terms of sustainability. This obligation was to take effect from August 2, 2022 for certain intermediaries, it will be made compulsory for all on August 1, January 2013.

European texts are not simple. And often intertwined. In fact, at least one European regulation and directive incorporate the concept of sustainability to the distribution of financial products. Not to mention the texts applicable to insurers which, although similar in substance, are systematically different in form.
The obligations imposed by the European Union on promoters and distributors of financial services did not all enter into force at the same time: on August 2, 2022 for some, November 22, 2022 for others, 1er January 2023 for the latest… The Autorité des marchés financiers has just confirmed the postponement of the obligation for everyone to 1er January 2023. At least for the players subject to its control, financial investment service providers, management companies, CIF.

European policy for sustainable development

To promote sustainable development and avoid the greenwashing the European Union has drawn up a list of green or sustainable activities. This is called taxonomy. This classification is of course very complicated but it makes it possible to identify the green activities as well as the green part in the activities of a company. Almost all sectors of activity will eventually be covered by this classification, except those which are incompatible with the environment (coal production for example) or which have no impact on the environment (most on duty).

Lasting repercussions on finance

A European regulation called “SFDR” (Sustainable Finance Disclosure Regulation) requires financial intermediaries to provide clear information on the ESG criteria funds and Sicavs that they offer to their clients. Clients need to know to what extent the funds offered to them invest in green activities, without causing prejudice to other environmental objectives, while respecting the criteria of good governance. But not all customers are equally sensitive to these environmental criteria. We must therefore ask them about this topic.

Ask customers about their sustainability preferences

To draw the attention of their customers to the importance of this theme and to find out their preferences, financial intermediaries will now have to – from 1er January 2023 – ask them a number of questions that will be in addition to their regular customer discovery questions.

The list of questions is not fixed very strictly, but the intermediary must be able to justify that he was able, through his questionnaire, to assess whether you want to use your investment to support a specific environmental objective (develop renewable energies, exclude certain sectors or have no negative impact on climate change, etc.). He will have to offer you a product that corresponds to your preferences. If he does not have it exactly available, he will have to offer you similar products or push you to modify your initial preferences.

These modifications of your preferences, undoubtedly inevitable in the first months or even the first years, the time that the products diversify, must be recorded in writing.

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