Integrating Sustainable Finance into the MiFID II and IDD Investor Protection Frameworks

Following its Sustainable Finance Action Plan, the European Commission has proposed amendments to integrate sustainable finance into the MiFID II and IDD investor protection frameworks. This contribution first sketches the behavioural problems explaining why retail investors do not always act upon their investment preferences and the potential role of the investment product distributor in bridging the gap between investors’ values and actual investment choices. Against this background, the author offers a critical overview of the revised MiFID II and IDD investor protection frameworks, from three perspectives: (i) their contribution to remedying the “value-action-gap” and to a more sustainable economy more generally; (ii) their contribution to the creation of a level playing field between economically similar investment products; and (iii) their coherence with other important sustainable finance measures, in particular the Sustainable Finance Disclosure Regulation and the Taxonomy Regulation.