European Commission consults on future of SFDR
The European Commission has initiated consultations regarding the implementation of the Sustainable Finance Disclosures Regulation (SFDR) and the possibility of creating fund labels or new investment strategy-based labels. The consultations target financial services and the sustainable finance sector, aiming to assess the ongoing relevance of SFDR and the effectiveness of its current disclosure framework.
The European Commission has initiated consultations regarding the implementation of the Sustainable Finance Disclosures Regulation (SFDR) and the possibility of creating fund labels or new investment strategy-based labels. The consultations target financial services and the sustainable finance sector, aiming to assess the ongoing relevance of SFDR and the effectiveness of its current disclosure framework.
The SFDR, initially proposed in 2018, has seen significant changes in the field of sustainable finance since its inception. The Commission seeks to determine whether the regulation aligns with investor needs and expectations and whether it remains fit for its intended purpose.
One key area of consideration is the potential introduction of sustainable fund labels. While the SFDR was originally designed as a disclosure framework, it has evolved into a de facto labelling system. This shift suggests a demand for establishing sustainability product categories to communicate the environmental, social, and governance (ESG) and sustainability performance of financial products more effectively.
The consultation acknowledges the risk of greenwashing arising from the use of SFDR as a labelling scheme and, therefore, explores the possibility of developing a product labelling system based on precise criteria. This system could either expand on Articles 8 and 9 of the SFDR to create product labels or adopt a new approach centered around specific types of investment strategies, such as “positive contribution” to sustainability objectives or “transition focus.”
In such a scenario, concepts like environmental and social characteristics or sustainable investment, as well as the distinction between current Articles 8 and 9 of SFDR, may potentially disappear from the transparency framework.
The consultation, open until December 15, also invites respondents to provide insights into the costs associated with SFDR requirements and inquires about the availability of high-quality data from corporations. Additionally, it seeks feedback on SFDR’s compatibility with other sustainable finance regulations.
Read more: https://esgclarity.com/sfdr-articles-8-and-9-may-disappear-altogether-as-consultation-launches/
