In a joint opinion released today, the three European Supervisory Authorities (ESMA, EIOPA, and EBA) evaluated the Sustainable Finance Disclosure Regulation (SFDR). The ESAs want a logical framework for sustainable finance that takes into consideration the lessons learnt from the operation of the SFDR and accommodates both the green transition and improved consumer protection.
The ESAs concentrate on how to classify financial goods into straightforward and unambiguous categories. Financial market participants should employ the two optional product categories, “sustainable” and “transition,” as part of the simplifications to make sure customers comprehend the goals of the offerings. To lower the dangers of greenwashing, each category’s guidelines should have a clear goal and set of requirements.
The European System of Accountants (ESAs) suggests that the European Commission take into account the creation of a sustainability index that would assign a grade to financial products such life insurance, investment funds, and pension plans.
The Opinion also addresses the following topics:
Improvements to the definition of sustainable investments, streamlining the disclosure process for investors, appropriate disclosures for products outside of the two categories to reduce greenwashing, and other technical recommendations such as identifying which products should be covered by the SFDR and enhancing disclosures about the detrimental effects of investments on people and the environment, as well as the necessity of conducting consumer research prior to submitting any policy proposals to review the SFDR, such as introducing an indicator or categorization system.