ESMA Flags MiFID II Sustainability Compliance Gaps Across EU Firms
ESMA published findings on sustainability compliance gaps observed in a multi-country MiFID II review.
Why it matters: The results reveal common challenges firms face integrating sustainability into advice and product governance under MiFID II. Legal and compliance teams should heed ESMA's emphasis on proportionate supervision, influencing enforcement and future rulemaking.
- ESMA's CSA reviewed how firms collect, assess, and match client sustainability preferences.
- Firms showed varying practices in categorizing products and assessing target markets for sustainability fit.
- ESMA urges national authorities to focus on dialogue and proportional supervision during the regulatory transition.
- Findings may shape future updates to MiFID II Delegated Acts and related sustainability guidelines.
The European Securities and Markets Authority (ESMA) has released results from its Common Supervisory Action (CSA) on how investment firms are meeting MiFID II's sustainability requirements.
- The review, published on 6 May 2026, scrutinized firms' approaches to integrating clients' sustainability preferences within suitability assessments and product governance procedures.
- The CSA highlighted varying practices among firms in collecting client sustainability data, matching products to those preferences, and applying the portfolio approach and target market assessments.
- ESMA underscored that while firms are making efforts, significant gaps remain in consistently applying sustainability factors across advice and product design processes.
Rather than immediate enforcement crackdowns, ESMA advocates for a proportionate supervisory approach during this transition period. National competent authorities are encouraged to foster dialogue with firms, intervening only in cases of clear breaches or mis-selling.
"ESMA reaffirms the importance of sustainability and encourages firms to continue implementing the MiFID II sustainability requirements, recognising that the CSA has been conducted at a time when the sustainable finance framework is undergoing significant revision," the agency stated.
Looking ahead, ESMA plans to leverage the CSA's findings when updating the MiFID II Delegated Acts and related guidelines — aiming to simplify rules and ensure more effective, EU-wide compliance on sustainable finance.
For further industry perspective, see independent analysis of the CSA's implications for legal teams.
What's next: ESMA will consider CSA outcomes when updating MiFID II sustainability acts and guidelines.