This document supplements the Common Minimum Standard for target market determination for securities following Level 2 amendments to MiFID II. It provides a structured concept to help manufacturers classify financial products according to sustainability-related objectives and factors, supporting alignment with client sustainability preferences as defined under MiFID II Delegated Regulation (Art. 2 No. 7). The framework applies across securities, funds, bonds, and certificates and is intended as a practical classification tool.

Basic concept : Product-independent definitions

The framework differentiates between non-ESG products, basic products, ESG strategy products, and products suitable for clients with sustainability-related objectives. Classification depends on whether sustainability risks and opportunities are considered, whether a recognised industry standard is applied, and whether the product follows a dedicated ESG strategy.
Products may address sustainability preferences through three categories: ecologically sustainable investments aligned with the EU Taxonomy, sustainable investments as defined by SFDR, and consideration of principal adverse impacts (PAIs). ESG strategy products are expected to reference recognised industry standards and, where relevant, disclose specific proportions of sustainable investments. Percentage disclosures may support distributor segmentation, though this is optional.

Minimum exclusions

Minimum exclusions apply mainly to direct investments in shares and bonds. These include companies with revenue exposure above defined thresholds to banned weapons, tobacco production above 5%, or coal above 30%. Exclusions also cover serious violations of the UN Global Compact, including breaches of human rights, labour standards, environmental responsibility, and anti-corruption principles.
For sovereign issuers, exclusions apply in cases of serious democratic or human rights violations, assessed using sources such as the Freedom House Index or equivalent ESG ratings. These exclusions form a baseline requirement for ESG-classified products.

Application for funds

For funds, the framework aligns ESG integration and ESG strategy with SFDR classifications. ESG integration products must systematically consider sustainability risks and opportunities and disclose the integration approach, typically referencing recognised standards such as the UN Principles for Responsible Investment.
Funds addressing sustainability-related objectives may qualify through a defined proportion of sustainable investments under SFDR, a defined proportion of Taxonomy-aligned investments, or consideration of PAIs combined with minimum exclusions. Quantitative thresholds are disclosed in fund documentation to support transparency and distributor allocation. Certain exclusions do not apply to funds investing solely in tangible assets, such as real estate, unless securities are also held.

Application for certificates and bonds

For bonds and certificates, classification depends on both the issuer and, where applicable, the underlying assets. ESG strategy products require issuers to consider the UN Global Compact, apply recognised product or transparency standards, and demonstrate sustainability status through at least one rating agency, with exemptions for segregated bonds such as green bonds.
Products may qualify through impact-related investments under SFDR or the Taxonomy Regulation, supported by percentage disclosures based on the green asset ratio and the composition of underlyings. PAIs and minimum exclusions apply selectively, particularly where products reference issuers or underlyings with dedicated ESG strategies.

Additional sustainability factors for products which consider PAIs

Products that consider PAIs must assess standard indicators set out in Annex I of the SFDR RTS. Depending on the asset class, these include greenhouse gas emissions, biodiversity, water, waste, and social or employee-related issues. For certain asset classes, such as real estate funds and government bonds, only a limited number of PAIs are applicable.

Additional sustainability factors (optional)

Optional disclosures allow manufacturers to specify environmental or social objectives, minimum proportions of environmentally sustainable or other sustainable investments, and product focus across environmental, social, or governance dimensions. Sustainability labels or standards may also be referenced to enhance transparency and comparability.