The Sustainable Finance Disclosure Regulation (“SFDR”) has been in force since March 2021 and is part of broader sustainability disclosure rules on how financial market participants, including asset managers such as AIFMs and UCITS management companies, should disclose sustainability related information to investors.
The implementation of the SFDR has proven complex and cost intensive and the industry has been asking for reviews of the SFDR. The feedback of the consultation showed that the industry is divided on the future shape of the SFDR. A part of the industry is asking for the SFDR to be reshaped and to move from disclosure to a labelling regime. The other part is advocating to keep the SFDR as a disclosure regime but improving it, considering a “new SFDR” would require (again) a huge amount of resources for implementation.
Following the 2023 consultation in January 2025, the Platform for Sustainable Finance (the “PSF”) issued recommendations to the Commission for the categorisation of products under the SFDR, moving away from the current Article 6, 8 and 9 categories. The PSF suggested the following categories: Sustainable, Transition and ESG Collection, each with specific minimum requirements.
The European Commission’s Call for Evidence on 2 May 2025 on the review of the SFDR is interesting in many respects. First of all, the format is different from the consultation that closed in 2023; the language is high level (the Commission is not posing specific questions as during its consultation in 2023). It seems the stakeholders are invited to give feedback around the direction of travel of the SFDR; i.e. should the SFDR be subject to major changes and introduce a labelling regime or remain a disclosure regime with enhancements. The Call for Evidence does not mention the specific categories proposed by the PSF earlier this year.
In the Call for Evidence, the Commission recognises that the review of the SFDR should aim at “(i) simplifying key concepts; (ii) streamlining and reducing disclosure requirements focusing on the most essential information for investors; and (iii) exploring the case for categorising financial products that make sustainability-related claims.”
It goes without saying that the coming months are going to be hugely important for the asset management industry considering the industry is divided on how the future SFDR should look. Furthermore, product categorisation could hamper flexibility when it comes to product design and query whether such categories are necessary for professional investors.
The deadline for submitting feedback is 30 May 2025. There was hope that the legislator would do a new round of consultation/call for evidence, considering the world has changed since the last consultation in 2023. Among others, the broader legislative changes such as the Omnibus initiative (especially regarding the CSRD) should be considered before reviewing the SFDR. The Commission is recognising the need for the SFDR to be aligned with the amended CSRD. However, there are questions when it comes to timing. The Commission is confirming that the SFDR proposal will remain due in Q4 2025 while the CSRD review will not be finalised in Q4 2025. Interestingly, the Commission notes that no further public consultation is planned but may reach out to stakeholder representatives.
