The European Supervisory Authorities have released a joint opinion, emphasising the need for a more coherent framework within the SFDR.
Aimed at supporting the green transition and boosting consumer protection, the ESAs suggest implementing straightforward categories for financial products to enhance clarity and reduce the risk of greenwashing.
The proposed categories, labelled as “sustainable” and “transition,” are voluntary and designed to help consumers easily comprehend the purpose of the financial products on offer. Moreover, the ESAs are urging the European Commission to consider the introduction of a sustainability indicator to rate financial products, including investment funds and insurance policies, which could greatly influence consumer choices and investment strategies.
The opinion covers a broad range of enhancements, such as clearer disclosures for products that do not fit into the new categories, refining the definition of sustainable investments, and simplifying how these disclosures are presented. The ESAs also recommend that consumer testing be conducted before any new policy proposals are implemented to refine the SFDR, including the potential categorisation system or introduction of a new indicator.
The ESAs have taken this initiative independently, reflecting their commitment to a transparent and effective sustainable finance framework. Their recommendations aim not only at simplifying the product categorisation but also at ensuring that investments are genuinely contributing to sustainability, thus safeguarding against misleading claims about environmental benefits.
The opinion also calls for a review of which products should be included under the SFDR’s scope and suggests improvements in disclosures concerning the negative impacts of investments on people and the environment. This comprehensive approach indicates a robust strategy to enhance the integrity of financial disclosures and the sustainability of investments.
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