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ESMA makes no secret of its – and the European Commission’s – goals, stating that the background to both CPs is the aim to: - reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth; - assess and manage relevant financial risks stemming from climate change, resource depletion, environmental degradation and social issues; and - foster transparency and long-termism in financial and economic activity. The CPs come out of the European Commission’s request to ESMA to “explicitly require the integration of sustainability risks (i.e. environmental, social and governance risks) in the investment decision or advisory processes” and ESMA is looking for investment managers to assess these risks alongside market, interest or credit risk in their due diligence on potential investments. At a fund group level, ESMA wants to see evidence at organisational and operational levels that senior management is committing the resources required to incorporate sustainability risks and to avoid any potential conflicts of interest. At firms captured by MiFID, staff giving advice will be required to have the skills, knowledge and expertise to include sustainability risks when considering suitability. Both groups are required to ensure they manage any potential conflicts of interest arising from incorporating these sustainability risks and factors into their processes. One thing ESMA makes clear is that a fund that doesn’t claim to take ESG considerations into account is not necessarily inappropriate for investors with ESG objectives, and vice versa. The consultation period for both CPs ends on 19 February and ESMA expects to provide its advice to the Commission by the end of April. At the same time as these CPs, [Financial Adviser reports](https://www.ftadviser.com/regulation/2019/01/16/fca-shifts-focus-to-mifid-product-governance/) that the FCA Chief Executive, Andrew Bailey, has told the Treasury Select Committee that its focus for MiFID II will move this year from costs and charges to product governance.  As the report says, the client segmentation carried out by advisers after RDR is unlikely to satisfy MiFID II requirements. So, if you thought you were beginning to get on top of MiFID II, don’t breathe a sigh of relief too soon! 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