SFDR review – A blueprint for a fit-for-purpose SFDR that fosters sustainable growth
New Eurosif report published
For the review of the Sustainable Finance Disclosure Regulation, which the European Commission plans to launch at the end of 2025, Eurosif recommends to:
- Establish clear categories of ESG/sustainability-related products based on minimum criteria.
- Empower end-investors with meaningful disclosure requirements.
- Ensure consistency with other EU sustainable finance rules to create a reliable and consistent framework.
A clearer and more reliable framework will provide end investors with reliable sustainability-related financial products matching their needs and preferences. This will enable scaling up investments for the industrial decarbonisation, growth and a resilient and competitive Europe.
Learning from current challenges and closing gaps
The SFDR has been applied since March 2021. Despite some flaws, it has largely improved transparency on the integration of sustainability risks and impacts in investments. “When you do something for the first time, it is rarely perfect from the start.” said Eurosif Executive Director, Aleksandra Palinska. After several years of application, some issues with the rules have been revealed. “The forthcoming review of the SFDR, announced by the European Commission, constitutes a great opportunity to address them and to ensure the framework can unleash its full potential”, she added.
The SFDR was conceived as a transparency regime. However, financial markets used it as a de facto product classification framework. This is problematic as labels or product categories need clear criteria and definitions to underpin them, which the SFDR is missing. We suggest developing these elements to turn SFDR into an effective and reliable classification system, improve transparency on all products, and make the SFDR consistent with the rest of the EU sustainable investment framework.
Read our press release here.
Read the SFDR report here.
