The European Commission has today proposed a set of amendments to the Sustainable Finance Disclosure Regulation (SFDR), the EU’s transparency framework for financial products integrating environmental or social aims. The changes are designed to address current shortcomings, making the rules simpler, more efficient, and better aligned with market realities. The revised rules will be more retail-friendly and usable for companies.
A comprehensive review of the SFDR by the Commission has shown that the current framework results in disclosures that are too long and complex, making it difficult for investors to understand and compare the environmental or social characteristics of financial products. Moreover, the SFDR has effectively been used as a de facto labelling system, causing confusion – particularly for retail investors – and increasing the risk of greenwashing and mis-selling. As a result, the regulation has not fully met its objectives to help the EU financial sector allocate capital for Europe’s sustainable priorities.
The amended rules proposed today will result in simpler and more usable information for investors, enabling them to make better informed choices. Providers of financial products will see a reduction in disclosure requirements, enabling them to cut costs. Together, today’s changes will bolster the EU’s leading role in sustainable finance and the competitiveness of its financial sector. Moreover, they will facilitate an increased participation of retail investors in EU capital markets, in line with the objectives of the savings and investments union (SIU) and help boost the flow of funds towards sustainable objectives.
