SFDR - what's next?
Earlier this month (10/10), the European Commission held an online conference titled "The Sustainable Finance Disclosure Regulation (SFDR) - What's next?". This included two panel sessions which explored SFDR, its challenges, and ways forward, and then whether a new SFDR would be more effective through product categories. The webinar also engaged participants in two polls, which found the following:
- 65% of webinar attendees felt SFDR disclosures "created more confusion than clarity, raising the risk of greenwashing".
- 59% of webinar attendees felt that product categories in the future should "cover all products, whether they have a sustainability claim or not".
The panel session discussions presented very interesting points. Some of the key points from the webinar and panels discussed are as follows:
- SFDR Progress - SFDR was created to align people, planet, and sustainable finance, and has brought sustainable finance into the boardroom. There is a continued interest in sustainable finance and those looking to brand as sustainable.
- Challenges - Retail investors face challenges on comprehensibility and their ability to absorb the information. In particular, they do not understand the complex rules associated with sustainable finance/SFDR as well as institutional investors.
- Disclosure Proposals - SFDR currently only captures sustainable investment funds and requires them to list factors before going to the market. Non-sustainable or 'harmful' investments, however, can more or less go straight to market. All investment products being subject to disclosures would help make an even playing field and build understanding of how sustainable different investments and the market are.
- Article 8 and 9 - The Central Bank of Ireland have seen little difference between sustainability of Article 8 and 9 funds when looking into the investments, or different risk appetite to SFDR. There have been cases of funds being labelled Article 6, when they would actually be Article 8 from fund managers who are less risk averse.
Overall, the European Commission's webinar gave some brilliant insights into SFDR and its developments. We eagerly await developments within their SFDR Consultation. For further information, or discussion, please contact a member of the Devlin Mambo team.