Sustainable Investing 2026: Regulation & ETFs
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Key Takeaways
- MiFID II has obligated financial advisers in the EU since 2026 to systematically record customers' sustainability preferences.
- A current analysis covers 173 tested sustainable ETFs (as of February 2026).
- Stiftung Warentest awards top ratings to eleven sustainable funds and ETFs.
- Sustainable financial products must contain a minimum share of sustainable instruments or consider material negative impacts (PAI).
- Sustainable equity ETFs enable simple and cost-effective access to companies with defined sustainability standards.
The European financial regulation MiFID II has obligated financial advisers in the EU since 2026 to systematically record customers' sustainability preferences and offer corresponding products. Distributors of financial instruments must ensure that sold financial products match their customers' individual sustainability wishes – a significant tightening of advisory duties in portfolio management.
Stricter Regulation through MiFID II
The Markets in Financial Instruments Directive (MiFID II) was supplemented by amendments to the delegated regulation. This integration of sustainability preferences into advice and portfolio management processes means in concrete terms: financial products must contain a minimum share of sustainable instruments or consider material negative impacts on sustainability factors.
These material negative impacts are referred to as Principal Adverse Impacts (PAI) – a term from the Sustainable Finance Disclosure Regulation (SFDR). PAI capture measurable negative effects of investment decisions on environment, social and governance. The SFDR defines the sustainability standards on which MiFID II is based.
Sustainable ETFs as Central Investment Form
Sustainable equity ETFs (Exchange Traded Funds) are developing into the core instrument for retail investors who want to invest cost-effectively and broadly in companies with defined sustainability standards. An ETF is a stock-exchange-traded index fund that passively tracks a specific index – for example, a sustainability index – and can be traded continuously like a stock.
A current analysis covers 173 tested sustainable ETFs (as of February 2026, according to available market overview). The tests identify both the most sustainable products and those with the best financial performance. Selecting a suitable sustainable index represents the essential step in the investment decision-making process.
Stiftung Warentest Awards Top Ratings
Stiftung Warentest has examined sustainable funds and ETFs and awards the top rating in the highest category to a total of eleven products. These independent tests provide retail investors with orientation in a growing market segment that, alongside ETFs, also includes actively managed sustainable funds.
Actively managed funds differ from passive ETFs in that fund managers select and rebalance securities deliberately. This typically leads to higher costs but offers additional selection possibilities according to sustainability criteria.
FNG Sustainability Profiles Provide Transparency
The Forum for Sustainable Investment (FNG) has been offering investors since 2012 its FNG Sustainability Profiles – an overview of sustainable investment strategies and relevant key data of investment funds. According to FNG notification from 25 March 2026, these profiles represent an established information source for classifying sustainable funds.
The profiles systematically capture which sustainability approaches a fund pursues – such as exclusion criteria, best-in-class approaches or impact investing strategies. Exclusion criteria exclude certain industries such as defence or coal. Best-in-class selects the most sustainable companies in an industry. Impact investing aims for measurable positive impact.
What Investors Should Consider
Selecting a sustainable ETF or fund first requires clarifying your own sustainability preferences. Investors should define which criteria matter to them: environmental aspects such as CO₂ reduction, social factors such as fair working conditions, or governance issues such as corporate ethics.
Costs play a central role. Sustainable ETFs typically have a total cost ratio (TER) between 0.10 and 0.50 per cent annually – significantly cheaper than actively managed funds with costs often above 1.0 per cent. TER includes administration and operating costs, but not transaction costs.
The transparency of the underlying index is another decision criterion. Investors should be able to understand the criteria by which companies are included in or excluded from the index. Index providers such as MSCI, FTSE Russell or Solactive publish methodology documents that describe these selection processes.
Market Development in the DACH Region
The German-speaking region is seeing growing interest in sustainable investments. The regulatory requirements through MiFID II and SFDR are accelerating this development, as financial advisers must actively discuss sustainability options. This increases the visibility of sustainable products in advisory conversations.
Investors in Switzerland, Germany and Austria benefit from a broad range of stock-exchange-traded sustainable ETFs available at major trading venues such as SIX Swiss Exchange, Xetra and Vienna Stock Exchange. Trading currencies include Swiss francs, euros and partly US dollars.