Financial sector calls for regulators’ coordinated approach in SFDR levels 1 and 2 reviews


EFAMA, together with the European Banking Federation (EBF), Insurance Europe, European Savings and Retail Banking Group (ESBG), Alternative Investment Management Association (AIMA), Association for Financial Markets in Europe (AFME), and the European Association of Cooperative Banks, have released a joint letter asking the European Commission to better coordinate the publication of new rules for the Sustainable Finance Disclosure Regulation (SFDR).

The European Supervisory Authorities (ESAs) released draft Regulatory Technical Standards (RTS) at the end of 2023 addressing Principle Adverse Impact (PAI) indicators and various technical issues within SFDR. The European Commission is currently assessing these. At the same time, the European Commission is also undertaking a broader and more fundamental review of the SFDR. Our associations are concerned about the lack of coordination between these major review projects, which put investors’ confidence in sustainable investment solutions and the reliability of the EU standards for sustainable disclosures at risk. The findings of consumer tests conducted by the ESAs demonstrate that investors still struggle to understand the aim and context of disclosures, as well as their content.

It is critical that these two reviews of the SFDR are fully coordinated to guarantee legal certainty and deliver a successful law-making process, preventing overlapping and doubling efforts. Consequently, our associations strongly encourage the European Commission to delay the adoption of the RTS measures proposed by the ESAs, and to reconsider changes to the SFDR holistically. In addition, the industry would need appropriate grandfathering measures, and at least a year for implementation once any changes to the SFDR are published, to be adjusted upwards to align with the availability of underlying data and the breadth of the changes.

The SFDR is a part of a larger set of regulatory initiatives (including the Corporate Sustainability Reporting Directive, Taxonomy Regulation, Corporate Sustainability Due Diligence Directive and European Single Access Point) which are interconnected, but the infrastructure between these different sets of regulation is still not in place and full PAI reporting only started in June 2023. Hence, making changes to standards that have just been implemented is still premature.

Instead, further feedback from the implementation of current requirements, and a consolidation exercise of the data infrastructure between the different sets of regulation, should take place to ensure that the regulation already in force works as intended, fulfils its purpose and creates value for investors. A period of stability is necessary to avoid confusion for financial market participants, consumers and investee companies.

Download the letter (pdf)

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