The Commission is reviewing SFDR because current disclosures are too long, complex, and hard for investors to compare. Articles 8 and 9 have been misused as labels, creating greenwashing risks. Firms also face high compliance burdens. Overall, SFDR isn’t delivering the transparency and effectiveness it was meant to, so a redesign is needed.
Why has the Commission proposed a review of the Sustainable Finance Disclosure Regulation (SFDR)?
The Commission communicated its intention to review the framework in December 2022, and subsequently carried out a comprehensive assessment that included two stakeholder consultations. In this process, the Commission identified several shortcomings. In particular, the current disclosure requirements regarding sustainability features of financial products are long, complex and difficult for investors to understand and compare. Moreover, the mis-use of the disclosure requirements under Articles 8 and 9 of the SFDR as de facto product categories has led to concerns of greenwashing and mis-selling of products. Financial market participants have also struggled to cope with the length and complexity of disclosure requirements, experiencing undue burdens and costs. As a result, the Commission concluded that the framework has not been fully effective in delivering on its broad aim to improve transparency and help mobilise private funds towards diverse sustainability aims.
European Commission
