In a statement yesterday (21 December), the industry group praised the transparency introduced by SFDR, but said the de facto labelling regime had “stretched it beyond its original intentions and not always been helpful”.
“The current European Commission review needs to address how SFDR can provide clearer, more meaningful information for retail investors, promote transition finance and align well with other relevant legislation,” it argued.
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In September, the European Commission launched a consultation on overhauling SFDR, which it said could see the Article 8 and 9 labels scrapped in favour of a new labelling regime.
EFAMA supported this proposal, advocating for an official categorisation using objective measures such as a description of the product’s intentions and ESG strategies in use, as well as the specification of credible KPIs.
This would also involve making the categories understandable to retail investors, which EFAMA said should be pursued by aligning changes in SFDR with investor sustainability preferences under MiFID and IDD.
A simplified and standard disclosure template for all financial products with sustainability claims should also be introduced, it added, and the information made more accessible to retail investors.
In addition, EFAMA called for transition finance to be clearly defined and integrated within SFDR, with the group arguing this would “incentivise investments that help companies moving towards a more sustainable business model”.
Finally, the industry body advocated for entity-level sustainability reporting within SFDR to be aligned with the Corporate Sustainability Reporting Directive, in a bid to reduce costs and “focus on providing information that truly helps decision-making”.
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Anyve Arakelijan, regulatory policy advisor at EFAMA, said: “The transformation of SFDR Articles 8 and 9 from their original role as disclosures into de facto labels highlights the market’s growing need for a well-defined categorisation system.
“This would simplify the landscape for investors, especially if these categories have names that are intuitively understandable.
“At the same time, we also see merit in building upon the market’s existing familiarity with SFDR concepts, such as PAIs, when this could further complement the product categorisation regime.”
Tanguy van de Werve, director general at EFAMA, added: “This review of the SFDR is much needed and we applaud the commission for being open to quite significant changes if they are in the best interests of investors.
“Whatever the changes will be, the investor sustainability regime under MiFID and IDD will have to be aligned accordingly to improve the customer journey and facilitate sustainable investing.”
