EFAMA Backs New SFDR Fund Categories

The European Fund and Asset Management Association’s (EFAMA) Sustainable Finance Disclosure Regulation (SFDR) consultation response has called for new product categories to be introduced. EFAMA said SFDR’s use as a de facto ESG labelling regime by market participants has “stretched it beyond its original intentions”. Earlier this week, ESG Investor found that consultation respondents were split on whether to stick with the existing Article 6, 8 and 9 labels or introduce a more precise product categorisation system. The association said the review needs to address how SFDR can provide “clearer, more meaningful” information for investors and promote transition finance. EFAMA suggested categorising financial products based their sustainability intentions using objective criteria. This would include a clear description of the product’s intentions, an explanation of the ESG strategies that will be followed, and the specification of credible KPIs. The association also recommended the introduction of a standard disclosure template for all financial products with sustainability claims, making information more accessible for retail investors. EFAMA noted that the concept of transition finance needs to be “clearly defined” and integrated within SFDR, which will incentivise investments that help companies moving towards a more sustainable business model rather than solely supporting on projects or firms that are already sustainable. To avoid unnecessary duplication, it proposed SFDR entity-level sustainability reporting should be aligned with the Corporate Sustainability Reporting Directive to reduce costs and focus on providing information that truly helps decision-making. 

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