Commission pledges to protect consumers who want to invest sustainably but lacks ambition
Posted on 24 May 2023
Today, the Commission published its long-awaited Retail Investment Strategy (RIS), together with accompanying legislative proposals.This new strategy aims to protect consumers while promoting sustainable investments. Multiple studies have consistently demonstrated that a significant majority of retail investors, ranging from 60% to 80% (1), want to invest their money sustainably. However, they encounter various challenges notably due to the existing regulatory framework in the European Union.
"The European Commission's retail investment package takes a step in the right direction, but it's like a band-aid on a broken bone. If the EU genuinely wants to empower retail investors with reliable advice and transparent sustainability information, it needs to roll up its sleeves and do some heavy lifting. EU co-legislators must craft a stronger framework that helps individuals make well-informed and sustainable investment choices," Mathilde Nonnon, policy officer at the WWF European Policy Office said.
The RIS provides an unprecedented opportunity to guarantee consumers have access to trustworthy financial advice, including on sustainable investments. Today, 45% of financial advisors admit to having no sustainability training at all (2), which hampers their ability to effectively incorporate their clients' sustainability preferences, as required under EU law.
WWF welcomes the review of the Markets in Financial Instruments Directive (MIFID), a crucial component of the Retail Investment Strategy, which includes a requirement to strengthen the sustainability expertise of financial advisors. However, WWF regrets that the requirement of systematically offering sustainable investment products to retail investors has not been included in the proposal, despite being requested by a majority of respondents in the Commission's public consultation on the Renewed Sustainable Finance Strategy.
Furthermore, WWF advises that a delegated act specifies the manner in which financial advisors inquire about the sustainability preferences of their retail clients. This would provide clarity to clients and legal certainty to financial advisors.
Currently, many consumers are still struggling to understand which financial product is sustainable or not. Therefore, WWF also welcomes the review of the Packaged Retail and Insurance-Based Investment Products (PRIIPS) regulation: this is a crucial opportunity to integrate key sustainability information about financial products for retail investors in a standardised manner. If successful, retail investors will be able to easily understand whether each fund is expected to have positive or negative sustainability impacts.
Note to the editor:
(1) Natixis (2016), Mind shift: getting past the screens of responsible investing; Schroeders (2017), Global Perspectives on sustainable investing; Maastricht University (2019), “Get Real, Individuals Prefer More Sustainable Investments; University of Cambridge (2019), “Walking the talk: Understanding consumer demand for sustainable investing”; 2° Investing Initiative (2020), “A Large Majority of Retail Clients Want to Invest Sustainably” provides a larger overview.