On 18 June 2024, the European Supervisory Authorities (ESAs) published an opinion on the assessment of the Sustainable Finance Disclosure Regulation (SFDR).

The ESAs have delivered this opinion on their own initiative, and it is published in the context of the review of the SFDR by the European Commission (Commission).

The opinion contains the following recommendations:

  • The Commission could consider the introduction of a product classification system, based on regulatory categories and / or sustainability indicator(s) to help consumers navigate the broad selection of sustainable products and support the full transition to sustainable finance.
  • The categories should be simple with clear objective criteria or thresholds, to identify which category the product falls into. The ESAs encourage, at least, categories of ‘sustainability’ and ‘transition’.
  • A sustainability indicator could refer to environmental sustainability, social sustainability or both, illustrating to investors the sustainability features of a product in a scale.
  • Options for product categorisation and /or sustainability indicator(s) should be consumer tested and consulted on. With clear product categories and/or sustainability indicator(s), sustainability disclosures would not need to be as detailed and extensive.
  • The Commission could revisit the co-existence of the two parallel concepts of “sustainable investment” as defined in the SFDR and Taxonomy-aligned investment as defined in the EU Taxonomy. The Commission should prioritise completing the EU Taxonomy and extend it to social sustainability.
  • The ESAs strongly recommend that the Commission ensures that sustainability disclosures cater to different investor needs, and improvements in sustainability disclosures should take into account different distribution channels, including digital ones, and ensure consistency of information provided. The Commission should prioritise only essential information for retail investors while professional investors may benefit from more detailed information.
  • The Commission could carefully reflect on whether to include other products in the SFDR scope to ensure harmonised disclosures for both products currently in the scope of the SFDR and any other products that could be brought into scope.
  • Information on key adverse impact indicators could be considered for all financial products, based on a cost-benefit analysis justifying the introduction of such requirement.
  • The Commission could evaluate the introduction of a framework to assess the sustainability features of government bonds, taking into account the specificities of that asset class.