“ESG matters are of major concern”

France’s stock market regulator, The Autorité des marchés financiers (AMF) has set the emergence of ESG awareness as a key goal in its 2020 action plan to improve investment research.

The investment research industry has undergone significant changes in Europe in recent years. MiFID II was enacted in the European Union in January 2018, mandating that investment service providers who provide investment advice on an independent basis, or portfolio management services, may no longer receive and retain remuneration from third parties. This dramatically changed the structure of compensation for sell-side investment research.

As part of its review of the impact of MiFID II, the AMF asked board member Jacqueline Eli-Namer, and Thierry Giami, president of the French Society of Financial Analysts (SFAF), to analyse the impact of the new policy on investment research and to explore possible areas of improvement.

One of the recommendations made by the AMF committee to improve financial research was to promote the inclusion of ESG principles in the analytical process, and to require training and certification in sustainable finance for analysts.

The AMF considers ESG matters to be of “major concern.” According to the AMF news release,

“It is essential to ensure that financial analysts have at least basic knowledge of non-financial matters. This should contribute to a better understanding by analysts of the risks and opportunities of companies, the shift towards a longer-term approach, an improvement in the quality of their investment recommendations and, ultimately, a better integration of non-financial matters into the financial culture. In this regard, the AMF welcomes the report’s recommendation to develop training and certification.”

Accordingly, the AMF has already recently added sustainable finance themes to its examination syllabus for certification of financial professionals. As part of its plan to further promote ESG principles in the finance industry and ensure adequate knowledge by professionals, it is now considering expanding the ESG content in its exams.