The European Supervisory Authorities propose recommendations to amending the SFDR

On June 18, 2024, the European Supervisory Authorities (EBA, EIOPA, and ESMA – ESAs) issued on their own initiative a joint Opinion on the Sustainable Finance Disclosure Regulation (SFDR). The Opinion calls for a coherent framework that supports the green transition and enhances consumer protection, based on lessons learned and feedback received. The ESAs encourage the European Commission to undertake consumer testing to inform its assessment and policy considerations. The main ESAs’ recommendations to the Commission can be summarized as follows:

• Product Classification System: Introduce a product classification system based on regulatory categories and/or sustainability indicators to help consumers navigate sustainable products and support the transition to sustainable finance.

• Categories with Clear Criteria: Create simple categories of financial products with clear, objective criteria or thresholds, including at least 'sustainability' and 'transition' categories. This would reduce the needed extent of sustainability disclosures.

• Consumer Testing: Test product categorization options and/or sustainability indicators with consumers and consult on them to ensure clarity.

• Revisiting Concept Coexistence: Revisit the coexistence of "sustainable investment" as defined in the SFDR and Taxonomy-aligned investment as defined in the EU Taxonomy.

• Catering to Different Investor Needs: Ensure sustainability disclosures cater to different investor needs, consider various distribution channels, and ensure consistency of information. Prioritize essential information for retail investors, while providing more detailed information for professional investors.

• Inclusion of Other Products in SFDR: Consider including additional products within the SFDR scope to ensure harmonized disclosures for all relevant financial products.