The European Commission has launched a new call for evidence as part of its review of the SFDR, aiming to streamline and clarify the rules that govern sustainability disclosures in the financial sector.
This latest consultation invites feedback from stakeholders on how to make the SFDR more effective and less burdensome for investors and financial market participants, claims ESG Today.
Implemented in 2021, the SFDR was introduced to enhance transparency around sustainability risks, impacts, and the sustainability-related features of financial products. The regulation obliges asset managers and other financial actors to disclose how they integrate sustainability risks and adverse sustainability impacts into their investment processes. Its broader goal is to support the EU’s sustainability agenda by attracting private capital towards environmentally and socially responsible investments.
However, the Commission acknowledged that while support for the SFDR’s objectives remains strong, feedback gathered during a 2023 review has highlighted several problems. Key concerns include ambiguity around legal definitions, overlapping disclosure obligations across the EU’s sustainable finance framework, and limited access to quality data. In particular, there has been criticism that the Article 8 and 9 classifications—originally designed to distinguish between financial products based on their sustainability characteristics—are increasingly used as unofficial quality labels, which may mislead investors and increase the risk of greenwashing.
To address these issues, the Commission has stated that its planned revision of the SFDR will aim to simplify core concepts, reduce reporting requirements, and align the regulation more closely with other sustainable finance initiatives. It will focus on ensuring that disclosures provide essential, decision-useful information for investors, while also easing the compliance burden for asset managers and other firms.
Another key area under exploration is the potential introduction of formal categories for financial products that promote sustainability-related features. According to the Commission, these categories could include products contributing to sustainability objectives, those supporting transition efforts, and those aligned with broader ESG strategies.
The call for evidence is open until 30 May 2025, and the Commission plans to publish its proposal for revising the SFDR in the fourth quarter of 2025.
Last week, the European Securities and Markets Authority (ESMA) launched a public consultation on new rules designed to regulate ESG rating providers.
The draft RTS covers a number of aspects that apply to ESG rating providers. This includes the information that should be provided in the applications for authorisation and recognition.
It also covers the measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings. Finally, the RTS covers the information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings.
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