Your investor profile: express your sustainability preferences
Since last August, the revision of the EU MiF 2 directive(1) has come into force. It requires European banks to assess their clients’ sustainability preferences. in addition to their knowledge of financial products and the desired level of risk. Like other EU banking institutions, Societe Generale has implemented this new questionnaire. Let’s take a look at it with Véronique Fouquet, Head of Compliance at Societe Generale Private Banking, interviewed by Claire Douchy, Head of Sustainable Commitments and Corporate Projects at Societe Generale Private Banking France.
Claire Douchy: The IPCC (Inter-governmental Expert Group on Climate Change) recently alerted us to the urgent need to limit our greenhouse gas emissions. The hot summer we have been through reminded us of that. Europe’s Green Pact has a whole section of provisions to finance sectors that contribute positively to the achievement of climate objectives. But Véronique, why add new questions on this topic within the MiF investor profile questionnaire?
Véronique Fouquet: These new issues stem from a European regulation called «Sustainable Finance», which came into force in August. Its objective is to redirect capital flows towards sustainable investments and thus ensure the financing of “green” activities, that is, activities that contribute significantly to climate change mitigation or adaptation(2). Concretely, what do these texts provide? On the one hand, they impose on institutions that design savings or investment products such as management companies, for example, a robust transparency framework allowing a comparison of sustainable products between them. On the other hand, they require large companies to publish in their activity report, the share of activities considered “green” (as of 2024)? Finally, they require distributors of savings products to take into account in their investment proposals the preferences of investors in terms of sustainability.
Claire Douchy: With greater transparency on sustainability criteria, clients will have access to more information enabling them to make informed investments. So precisely, what new information is made available to savers?
Véronique Fouquet: The investor will find in the prospectus of the financial product information related to the underlying product as well as the product category. There are now three new categories of products according to the SFDR regulation(3), allowing to classify products and to have a better transparency and understanding for our clients: «Article 6» products that have no lasting characteristics, products “Article 8” that promote sustainable global features. And finally, “Article 9” products, which are specifically aimed at an environmentally sustainable goal.
The product is committed to investing in sustainable activities | The product is committed to investing in activities that contribute significantly to an environmental objective | The fund is committed to managing its negative impacts on sustainable development issues | |
Art. 6: no sustainability criteria | Not concerned | Not concerned | Not concerned |
Art. 8: promotes sustainability criteria | Mandatory and expressed as % of outstanding | Optional and expressed as % of outstanding | Mandatory and indicates a theme |
Art.9: aims at a sustainable environmental goal | Mandatory and expressed as % of outstanding | Mandatory and expressed as % of outstanding | Mandatory and indicates a theme |
Types of information available by product category
Claire Douchy: And so Véronique, if I continue the reasoning, I suppose that the questions that are asked to investors and investors are precisely about their preferences on each of this information, meaning is, the desired proportion of sustainable activities in the global sense without a particular theme, the desired proportion of activities that contribute to the environment - so-called “green” activities - and finally, the themes on which the customer wants the product to limit its negative impacts?
Véronique Fouquet: That’s exactly it, the investor can indicate if he wants a personalized approach on one and/or the other of these criteria, as you very correctly described at the moment, or if they prefer a "generic" sustainable approach that corresponds to the one predefined by Societe Generale Private Banking, or of course no sustainable preference at all.
Claire Douchy: Indeed Societe Generale Private Banking has for several years been committed to offering its clients a range of sustainable products and services. Of course, if you want to have further information, we invite you to contact your banker.
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(1) MiF 1 (Markets in Financial Instruments) is a European directive adopted in 2004 and implemented in 2007. As a regulatory framework for financial markets, it notably reinforces the obligation for providers of investment, classification and client information services. After the 2008 financial crisis, the European Commission wanted to make MiF 1 evolve. The revised directive, called MiF 2, was passed in 2014. It aims to better protect retail investors and strengthen the transparency, security and functioning of financial markets.
(2) The other four “green” issues are: sustainable use and protection of water and resources, protection and restoration of biodiversity and ecosystems, pollution prevention, transition to a circular economy
(3) The Sustainable Finance Disclosure Regulation (SFDR) aims to provide greater transparency in terms of environmental and social responsibility in financial markets. It requires that each product is classified according to its characteristics.
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