ESAs present advice on PRIIPs with environmental or social objectives
On the 31st of May 2016, the European Commission mandated the Joint Committee to provide its technical advice specifying the details of the procedures used to establish whether a PRIIP targets environmental or social objectives. The underlying goals were to set out indications for the manufacturer to follow to show potential retail investors and other stakeholders - including supervisors and market participants - the substance of these objectives, and how these specific objectives are to be met throughout the investment process and the lifetime of the PRIIP. The governance system was under particular scrutiny inasmuch as it is set to ensure that disclosed environmental and social objectives are effectively met and that there is an accompanying validation procedure apt for this purpose. After a Consultation Paper (JC 2017 05) launched on the 10th of February, giving the opportunity to stakeholders to comment on the draft Technical Advice and impact assessment, the main challenges highlighted were:
- - The drafting was augmented to indicate more clearly where the existing legal framework addresses the issues raised in the mandate of the European Commission, including the extent to which product oversight and governance address the different expectations
- - The structure of the technical advice was adjusted to better reflect the mandate
- - The drafting was adjusted to avoid implications that a label was being established
On the 28th of July, the European Supervisory Authorities (ESAs) submitted their Technical Advice to the European Commission to set minimum requirements, with which manufacturers of packaged retail and insurance-based investment products with environmental or social objectives (EOS PRIIPs) should comply to ensure that they offer products that meet the retail investors' needs.
The recommendations for the PRIIPs manufacturer targeting environmental or social objectives are to clearly determine what those objectives are and align them with a strategy on how to achieve them. Particular focus centres around the governance of the process in place to achieve these objectives and the consequent monitoring measures which should be proportionate and in line with the strategy.
Eurosif welcomes the general framework suggested in the recommendations which gives manufacturers the flexibility they need in devising products with social or environmental objectives while not being forced to opt for a predetermined SRI strategy or footprint measurement.