The EU’s new SFDR proposal includes three easier ESG product categories, Sustainable, Transition, and ESG Basics, along with shorter and simpler disclosures, the removal of entity-level reporting, and clearer rules on what funds can invest in and what they must disclose when making ESG claims.
What are the key elements in today's revised SFDR?
The key elements in today's proposal are: Removal of entity-level disclosures: the requirement for Financial Market Participants (FMPs) to publish and maintain on their website where they consider principal adverse impacts of investment decisions on sustainability factors is deleted, including the corresponding templates. Until now, FMPs with more than 500 employees had to provide this information. Significant reduction of the product-level disclosures: information towards investors is shortened and simplified. For example, the number of topics covered in disclosure templates will be reduced. Moreover, disclosures will be coherent with the new product categories and rely on clear, measurable and usable concepts. Introduction of a categorisation system with three categories: Based on extensive stakeholders' feedback, the Commission is proposing three voluntary categories (see question 3) that build on existing market practices. The key objective is to bring clarity to investors regarding products that have a level of sustainability-related ambition, enabling them to match their investments with their sustainability preferences. Most importantly, the categories are simpler, clearer, and less data-intensive than the current concepts of the SFDR. The complex disclosure requirements under Articles 8 and 9 of the SFDR are deleted. These had caused significant uncertainty and issues of mis-selling and misuse of disclosures as labels. ESG claims made in names and marketing documents will now strictly be reserved for categorised products, ensuring that any products sold as ESG comply with common EU minimum criteria.
European Commission
