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Wealth Management / Business Compliance — MiFID 2 : Integration of ESG preferences

Use Case

MIFID 2 Integration of ESG preferences

The integration of client sustainability preferences (in accordance with the Commission Delegated Regulation 2021⁄1253 of the European Commission) required additional constraints on investment services providers for advisory services.

Valthena supports a major private bank with the following objectives :

  • Understand regulatory obligations,
  • Assess impacts on both client relationships (financial education of clients on ESG dimensions, ESG preference questionnaires) and the investment universe (alignment of offerings and range with ESG requirements), as well as in terms of information systems (suitability engines, investment proposals…).
  • Implement regulatory obligations in processes, procedures, and information systems

  • Approach

    The project was structured around several phases:

    Awareness on regulatory requirements

    • Decoding regulatory requirements
    • Training private bankers on ESG preference regulatory requirements

    Definition of ESG preference questionnaire 

    • Defining ‘client’ questionnaire to capture ESG preferences
    • Calibrating intervals on the three dimensions (% of investments, grouping of PAIs…)
    • Preparing talking points to guide bankers
    • Preparing client communication

    Adaptation of product universe, 

    • Product governance — Review of the product universe to ensure the ability to meet client preferences / Enrichment of the universe with new funds
    • Review of the discretionary management offer with the creation of a specific green discretionary management offer (with a selection of ad-hoc funds)
    • Review of the delegated management offer

    Assessment of impacts on information systems, 

    • Digitization of the questionnaire,
    • Adaptation of suitability engines to consider ESG preferences,
    • Review of the investment proposal model,
    • Periodic suitability engine review

  • Results

    1. Training for bankers
    2. Client communication/education,
    3. Digitized ESG preference questionnaire,
    4. Enrichment of the investment universe,
    5. Creation of a new ‘green’ discretionary management offer,
    6. Integration of ESG criteria into suitability engines for investment proposals and periodic reviews.