Regulation is ‘rarely perfect from the start’, states the sustainable investment association
The European Commission should establish clear categories for sustainability-related products under the Sustainable Finance Disclosure Regulation, states a trade association.
The European Sustainable Investment Forum has created a series of recommfinishations in response to a call for evidence from the commission, advising the introduction of three categories: “sustainable”, “transition”, and “binding environmental and social factors”.
As well as product categories, the commission should introduce “meaningful” minimum disclosure requirements and ensure the regulation sits within a “reliable and consistent sustainable investment framework”, Eurosif states in its report.
Products that are not categorised under the SFDR should include a disclaimer building this clear to finish investors, it adds.
The commission is reviewing the SFDR, which has been in force since March 2021. The regime has caapplyd considerable confusion among investors and other financial market participants, the association adds.
While it was intfinished as a transparency regime, financial markets have applyd the regulation as a de facto product classification framework, Eurosif states.
This is a problem, it adds, becaapply for a classification framework to be effective it would required clear criteria underpinning each category — which the SFDR does not contain.
There have been other issues with the regime, with concepts and definitions left unclear, leading to market fragmentation and concerns around greenwashing, adds the report.
“When you do something for the first time, it is rarely perfect from the start,” Eurosif executive director Aleksandra Palinska stated in a statement. “The forthcoming review of the SFDR . . . constitutes a great opportunity to address them and to ensure the framework can unleash its full potential.”
If the commission receives this right, the SFDR can “support to mobilise and channel the savings of EU retail investors towards the real economy by leveraging their strong appetite for sustainable investments”, adds senior policy adviser Pierre Garrault.
The report is available to read here.
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