Early adaptation to sustainable finance regulation: how MiFID II sustainability preferences affect the range of eligible financial instruments

Laura Grumann (), Mara Madaleno () and Elisabete Vieira ()
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Laura Grumann: Universidade de Aveiro
Mara Madaleno: Universidade de Aveiro
Elisabete Vieira: Instituto Superior de Contabilidade e Administração da Universidade de Aveiro (ISCA-UA)

SN Business & Economics, 2025, vol. 5, issue 10, 1-29

Abstract: Abstract Since August 2nd, 2022, EU-based investment firms providing investment advice or portfolio management are required to educate their clients on sustainability factors, the adverse impacts of investments, and to incorporate possible sustainability preferences of their clients in an investment proposal. This article aims to analyze the early adaptation to this regulation between August 2022 and April 2023. We define scenarios for possible sustainability preferences matching the requirements of Delegated Regulation (EU) 2021/1253, and we use actual financial instrument data to empirically investigate how each scenario affects the eligible financial investment universe, based on mutual fund data from Germany. We find that applying environmentally sustainable and taxonomy-aligned scenarios with any quantitative threshold to a large universe of around 9000 funds is reducing the eligible instruments to below one-tenth. A major extent of such investments, with 50% or more, is reducing the eligible instrument universe to around one percent of the overall fund universe. Additionally, we observe that data quality and data coverage in this early period are insufficient and inconsistent. Further, we suggest leveraging the committed minimum investment under Delegated Regulation (EU) 2021/1253 to quantify sustainable and taxonomy-aligned investments and tracking the contribution to the European Green Deal based on these measures. In the conclusions, we propose actionable measures to improve regulatory effectiveness.

Keywords: Sustainability preferences; Suitability; MiFID II; Green deal; Green finance (search for similar items in EconPapers)
JEL-codes: E22 F36 G18 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s43546-025-00892-x

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