ESAs opinion on SFDR

ESAs propose enhancements to SFDR

Earlier this month the European Supervisory Authorities (EBA, EIOPA, and ESMA – collectively ESAs) published a joint Opinion on improving the Sustainable Finance Disclosure Regulation (SFDR). The European Supervisory Authorities changes are based on learnings gained from the SFDR’s implementation to date.

The Opinion recommends introducing two voluntary categories for financial products: “sustainable” and “transition.” These categories aim to simplify the product landscape, helping consumers understand their purpose.

Additionally, the ESAs propose the introduction of a sustainability indicator to grade financial products such as investment funds, life insurance, and pension products. They also advocate for appropriate disclosures for products outside the two main categories, refining the definition of sustainable investments, and simplifying the presentation of disclosures to investors.

The SFDR has been a major part of the European Union’s efforts to promote transparency in sustainable finance. The ESAs’ recommendations come as part of a comprehensive review of the SFDR framework by the European Commission, following initial implementation.

For more information, on ESAs opinion on improvements to the sustainable finance disclosure regulation.

In addition, the opinion also covers the following areas:

appropriate disclosures for products outside the two categories to reduce greenwashing,
improvements to the definition of sustainable investments,
simplification to the way disclosures are presented to investors,
other technical suggestions including on which products should fall under the scope of SFDR and on how to improve disclosures regarding the negative impact of investments on people and the environment, and
the need for conduct consumer testing before putting forward any policy proposals to review the SFDR, such as to introduce a categorisation system and/or an indicator.