New ESG Rules to Protect Everyday Investors Cause Confusion (1)

A new set of EU rules coming into force Tuesday will put fresh pressure on asset managers as they seek to steer everyday retail investors around the complexities of sustainable investing.

The changes are the result of an amendment to the revised Markets in Financial Instruments Directive, or MiFID. It requires investment managers and financial advisers to understand and act on the “sustainability preferences” of retail clients. These investors, in turn, can hold asset managers to account if their ESG funds don’t meet expectations -- by not being as green as they might initially appear, for example.

In practice, many ...