• 1000

UCITS, AIFS and MiFID Investment firms providing investment advice have already been subject to changes related to sustainability risks through the Sustainable Finance Disclosures Regulation (“SFDR”), with more changes coming for its green products under the Taxonomy Regulation (the “Taxonomy”).

In order to support the sustainability requirements under SFDR and the Taxonomy, new legislative measures have come into force during August 2021 which will impact asset managers, including the providers of UCITS, AIF’s and MiFID investment firms, along with insurance and re-insurance undertakings. These will be effective from August 2022, except for MiFID product governance measures, which have some additional time until November 2022. Ian Nelson and Conor Holland explore the implications below.


UCITS Management Companies and AIFMs must take sustainability risks into account in:  

  • Organisational arrangements, including controls, policies, processes, and internal. They should also be considered in decision making, compliance, record-keeping, and risk management processes and policies. Where principle adverse impacts of investment decisions on sustainability factors are considered, due diligence policies along with policies in investment monitoring and selection should be updated accordingly. Senior Management at Mancos and AIFMs are responsible for ensuring the assessment of sustainability risks and their integration into the organisation.
  • Resource requirements must be considered to ensure there are the necessary resources and expertise to understand and manage these sustainability risks.
  • Identification of conflicts of interest that may damage the fund should include any conflicts arising from the integration of sustainability risks e.g. from remuneration, greenwashing, mis-selling or mis-representation of investment strategies etc.


MiFID firms will need to integrate sustainability factors, risks and preferences including:  

  • Sustainability risks taken into account in general organisational requirements including policies, processes, controls, resources, record-keeping, internal reporting.  These are also to be considered in risk management policies, procedures, and risk tolerances.
  • Identification of conflicts of interest should also consider potential damage to an investor’s sustainability preferences
  • Investment advice provided to clients should consider sustainability factors in the selection of products. 
  • Assessment of suitability of a product must include the sustainability preferences of clients and included in any suitability reports. 

From 22 November 2022, MiFID firms manufacturing financial instruments must consider sustainability factors in product governance, approval, and oversight. This includes:

  • considering sustainability-related objectives in analysing potential target markets, and consistency of the financial instrument objectives with the target market. This consistency should be reviewed on a regular basis.
  • Sustainability factors presented transparently so distributors can consider the sustainability related objectives of their clients.
  • Product governance arrangements to ensure products and services are compatible with clients’ needs must include their sustainability related objectives and this should be reviewed on a regular basis.

Summary of impacts

The below table sets out the summary of impacts for UCITS, AIFs and MiFID firms.





Mancos must ensure sustainability risks are:
  • incorporated into its procedures and organisational structure
  • supported by necessary resources with the expertise to manage these risks
  • integrated in its activities including:
    • Investment policy and fund documents
    • Approval of investment strategy
    • Compliance function
    • Review and approval of investment decisions
    • Risk review of investment policy, strategies and fund risk limits
    • Approval of procedure on investment decisions
    • Risk management policies and processes
  • Where the principal adverse impacts of investment decision making on sustainability risks are considered (per SFDR), then they should be incorporated into due diligence requirements.
  • included in identification of conflicts of interest
  • included in risk management policy and procedures

Delegated Directive 2021/1270


Effective from 1 August 2022 - to be adopted into law in Ireland by 31 July 2022


  • AIFMs must ensure sustainability risks are:
    • included in due diligence and monitoring of investments
    • understood, with adequate knowledge in the AIFM
    • implemented into policies and procedures regarding due diligence and investment decision making
    • taken into account in decision-making procedures, organisational structure, compliance controls, internal reporting, and record keeping
    • integrated in activities by Senior Management
  • Where AIFMs consider the principal adverse impacts of investment decision making on sustainability risks (per SFDR), then they should be incorporated into the above.
  • have the necessary resources and expertise to effectively integrate sustainability risks
  • include sustainability risks in identification of conflicts of interest
  • include sustainability risks in risk management policy and procedures,

Delegated Regulation 2021/1255


Effective from 22 August 2022

MiFID Investment Firms

  • Firms should ensure sustainability risks are considered in decision-making procedures, organisational structure, compliance controls, internal reporting, record keeping, and risk management policies and procedures.
  • include clients sustainability preferences in the identification of conflicts of interest 
  • In providing a description of the information considered in investment advice to clients, the sustainability factors considered in the selection process of financial instruments should be included, where relevant
  • where Firms provide financial advice or portfolio management, they must
    • conduct an assessment of suitability to include how it meets any sustainability preference of the client.
    • Have policies to show they understand the sustainability factors of products
    • Include sustainability preferences in reports on suitability of product provided to clients  

Firms manufacturing financial instruments

  • Firms must identify sustainability-related objectives in its identification of a target market
  • Sustainability factors of the product should be consistent with target market
  • Sustainability factors to be displayed
  • Information provided to distributors on sustainability factors of investment should be transparent and relevant
  • Review of product suitability to target market will consider if it remains in line with sustainability objectives.

Delegated Regulation 2021/1253



Effective from 22 August 2022





Delegated Directive 2021/1269

Effective from 22 November 2022 - to be adopted into law in Ireland by 21 August 2022.

How KPMG can help

We can provide a tailored service to assist you:

  • Review the implementation of these new measures in your policies, procedures and fund documents and provide recommendations for improvement
  • Provide a readiness assessment or gap analysis against the new MiFID product governance rules, which are effective in November 2022.
  • Provide a sustainability-related roadmap tailored to your organisation, outlining impacts from upcoming legislation

Contact Ian Nelson or Conor Holland with any queries; we'd be delighted to hear from you.

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