On 6 July 2020, the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) published a sector letter containing guidelines on sustainability in the context of new rules and regulations.
Many new laws and regulations are currently being introduced in the field of sustainability. For example, as of 10 March 2021, the EU ESG Disclosure Regulation (2019/2088) will apply. Furthermore, several changes to the UCITS Directive, AIFMD and MiFID II are also proposed with regard to the integration of sustainability risks and factors.
In recent months, the AFM has held discussions with investment firms, fund managers and relevant sector organisations about these new rules and regulations. This has revealed, among other things, that the implementation of these rules and regulations has a significant impact on the business operations of these financial undertakings. For example, undertakings will be required to have the necessary capacity and knowledge to contribute to the effective integration of sustainability risks. The obligation to identify and manage sustainability risks is new to many undertakings. The AFM notes that these rules and regulations may have consequences for existing financial products: products that are now described as ‘sustainable’ may no longer be deemed as such, or will have to meet strict disclosure requirements. It is important that undertakings carefully assess whether the sustainable goals and characteristics match the definitions and qualifications of the new rules and regulations.
The purpose of this letter is twofold. First of all, the AFM uses this letter as a way to provide general feedback on the discussions with the aforementioned financial undertakings and provides an overview of noteworthy insights. Second, the AFM provides guidelines that may assist in implementing future changes related to sustainability. The AFM emphasises that the letter does not provide a complete picture of what is necessary. Furthermore, the AFM notes that although the letter has only been sent to investment firms and fund managers, it also expects other financial undertakings to also take the sector letter into account.