The European Supervisory Authorities (ESAs) have urged for a unified sustainable finance framework to enhance investor trust, confidence, and engagement in economic financing. These authorities, overseeing the insurance, banking, and market sectors, have submitted recommendations to the European Commission for revising the Sustainable Finance Disclosure Regulation (SFDR), widely regarded as a global standard.
Their proposed changes include implementing distinct labels to classify insurance, pension, and investment funds facilitating consumer comparisons of products aligned with environmental, social, and governance (ESG) principles. They also advocate for a “sustainability indicator” to assess financial products and stricter criteria for defining “sustainable investments.” They argue that the SFDR allows companies to pursue various ESG strategies that make it difficult to compare products.
Furthermore, the ESAs propose introducing new product categories such as “sustainable” and “transition,” each with defined objectives and criteria to minimise risks associated with greenwashing. Initially voluntary, the ESAs suggest that these categories should be mandatory by the European Commission.
Following the European Commission’s launch of a consultation on the SFDR in September 2023, stakeholders’ feedback is currently under review to inform further developments.