EU regulators are being advised to approach changes to sustainable finance regulations cautiously to avoid causing delays in the sector’s growth.
According to Environmental Finance, this advice comes as the EU considers revisions to the Sustainable Finance Disclosure Regulation (SFDR), initially implemented in March 2021 to enhance transparency. These changes are in response to the misuse by certain entities, leading to potential anti-greenwashing rules and improved sustainability labelling.
Graeme Ardus, head of ESG at Triton Partners, emphasised the risks of significant updates to the regulation. “If the playing field changes substantially, we’ll have to start again,” Ardus said. He highlighted that substantial amendments could pose a considerable challenge for private equity and their invested companies, which have already adjusted to the current regulations.
Despite the consultation process that concluded in December 2023, the European Commission has not yet announced any updates, and all potential changes remain uncertain. Elena Arveras from the Commission’s financial services directorate noted that the feedback from the consultation did not show any definitive trends, leaving all options open.
Ardus voiced concerns over the duplication of efforts and potential errors in the industry as multiple players collect the same data from portfolio companies. He argued for standardisation and better collaboration among participants to reduce the current data collection burden, which is tying up significant resources and affecting the ability to focus on sustainability goals.
Furthermore, Ardus discussed the recent performance of Triton Partners, which invests across various sectors in Europe and is currently managing funds classified as Article 8 under SFDR. Over the past seven months, the firm has successfully exited six investments, achieving a notable return on invested capital.
As regulatory updates loom, Ardus stressed the importance of maintaining continuity in regulations to allow investors to adapt without hindering ongoing improvements. “Having some continuity would be a good thing in the short term, so that we can focus on ongoing improvements,” he explained.
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