Steven Curfs (ALCO): Rising to the Challenges of Sustainability

Steven Curfs, interviewed Monica Carlessi, Senior Compliance Advisor and Alessandra Simonelli, Head of Sustainable Development at BIL. They consider the progress of legislations that provide investors with sustainability options. They discuss how BIL is addressing the challenges of applying ESG standards while guidingclients on how to adopt ESG considerationsin their investment decisions.

How is BIL implementing the rules on ESG?

Firms providing investment management and investment advice have sustainability obligations under the EU’s Markets in Financial Instruments Directive (MiFID). They are required to collect clients’ sustainability preferences and to integrate these into their suitability assessment. While this may appear easy at first sight, it requires firms to make substantial investments in time and resources to comply. Firms must develop and integrate a questionnaire to assess clients’ sustainability preferences. From this survey, a comprehensive map of available products that meet the clients’ expressed criteria and preferences need to be drawn. To implement the requirements, firms need to train financial advisors and relationship managers on how to discuss ESG factors with clients effectively.

Steven Curfs, ALCO Board Advisor

Alessandra Simonelli, Head of Sustainable Development

Monica Carlessi, Senior Compliance Advisor

What have been the biggest challenges?

The regulatory landscape for ESG is evolving rapidly. Implementation of MiFID and Sustainable Finance Disclosure Regulation (SFDR) throws up inconsistencies. They sometimes lack clear guidance, giving rise to issues of the misalignment of products with sustainability investment preferences. This requires room for interpretation and a need for flexibility. It also creates new challenges. Training staff is essential as ESG awareness remains low. . Another challenge is the availability and quality of data about companies and investment products. Clients’ sustainability preferences can be very different, from focusing on taxonomy-aligned products, to investments considering negative impacts on sustainability factors, and to products focusing on ‘E’, on ‘S’ or ‘G’ factors. This makes the standardization of investment solutions that satisfy all clients a series of considerable challenges.

“At BIL we see the implementation of MiFID and SFDR as a journey"

How is BIL addressing the challenges raised by the need to implement MiFID and SFDR?

At BIL we see the implementation of MiFID and SFDR as a journey. It is not a one-shot but a progressive process in which products and tools will evolve with the market. For example, our questionnaire assessing clients’ sustainability preferences now has a second version. The granularity of the questionnaire has increased, to take into consideration clients’ more specific requests. The responses will facilitate the operational possibilities, the design and development of new products and the adaptation of existing ones. We developed our BIL sustainability framework, we launched BIL Green Bonds aligned with ICMA and our sustainability investment framework and our funds received a LuxFLAG label to provide clients with independent assessments of our ESG product range. Finally, our training plan will continue to evolve, in order to ensure that advisors and relationship managers can help clients understand how sustainability criteria are applied.