EC consults on future of SFDR articles

The European Commission has begun consultations on its SFDR articles for sustainable investments and products.

The consultations on Sustainable Finance Disclosures Regulation will look at the articles’ implementation following criticism from investors on how they are applied and their possible use for greenwashing. It could mean that Articles 8 and 9 are replaced by fund and product labelling that uses more precise criteria, or there is a description based on investment strategy types.

The EC said in a statement that, “the SFDR was designed as a disclosure regime, but is being used as a labelling scheme, suggesting that there might be a demand for establishing sustainability product categories. The fact that Articles 8 and 9 of the SFDR are being used as de facto product labels, together with the proliferation of national ESG/sustainability labels, suggests that there is a market demand for such tools in order to communicate the ESG/sustainability performance of financial products. In such a scenario, concepts such as environmental/social characteristics or sustainable investment and the distinction between current Articles 8 and 9 of SFDR may disappear altogether from the transparency framework.”

The consultation invites comments and cost breakdowns from investors and ends on 15 December.