Consultation results reveal investors and industry networks undecided on whether to leave Articles 8 and 9 behind.
The European Commission has published a summary report outlining feedback to its consultation on the future of its flagship sustainable finance disclosure regime, having found no clear consensus on how to improve the framework.
The Sustainable Finance Disclosure Regulation (SFDR) first came into effect in March 2021, introducing disclosure requirements for fund managers to report at the entity- and product-level on how and to what extent their funds align with Article 8 and 9 fund categories.
In the three years since, compliance with SFDR has been fraught with challenges, prompting the commission to run a three-month consultation last year proposing changes to existing disclosure requirements and questioning whether the regulation was still relevant.
With the results now visible, it appears that while most respondents agreed that SFDR’s purpose remains valid, they question its current effectiveness, with 62% noting that SFDR has not sufficiently strengthened protection for end investors and 52% claiming it has not successfully directed capital towards sustainable and transition investments. In addition, 84% of respondents said SFDR disclosures were not useful to investors.
Meanwhile, seventy-seven percent of respondents highlighted additional limitations within the framework, such as a lack of legal clarity on key concepts, limited relevance of certain disclosure requirements, and ongoing issues with data availability.
A large majority of respondents called for disclosure requirements such as adverse sustainability impacts to be simplified and streamlined across the EU’s sustainable finance framework.
“Support for SFDR remains strong, demonstrating its positive effect on improving the transparency of sustainable investments,” Pierre Garrault, Senior Policy Adviser at pan-European sustainable investment organisation Eurosif, told ESG Investor. “But many respondents – including Eurosif – find it insufficiently clear in defining key terms and acknowledge it is used as a de facto labelling regime.”
The commission also noted “no clear preference” for either of its two proposed approaches to a potential EU fund labelling system.
One of these options would involve designing and implementing new criteria that would more closely align with the UK’s Sustainability Disclosure Requirements (SDR), whereas the other would formalise Article 8 and 9 as
