The European Commission has launched a formal call for evidence to revise its Sustainable Finance Disclosure Regulation (SFDR), aiming to improve the regulation’s clarity, reduce compliance burdens, and better align it with broader ESG and carbon neutral strategy goals. 

Introduced in 2021, the SFDR requires financial market participants, such as asset managers, to disclose how they integrate sustainability risks and impacts into their investment processes and financial products. The regulation’s core mission is to enhance investor transparency while channeling private capital toward the EU’s green transition. 

As part of a broader sustainable finance framework review initiated in 2023, the Commission’s new consultation will gather feedback until May 30, 2025. It seeks stakeholder input on key challenges in the current SFDR, including vague legal definitions, overlapping disclosure requirements, limited data availability, and inconsistencies with other EU green finance measures. The review also targets concerns around the Article 8 and 9 classifications being misused as unofficial sustainability labels—raising greenwashing risks. 

To address these issues, the Commission proposes several key reforms: 

• Simplifying SFDR concepts to improve legal clarity. 

• Streamlining disclosure requirements to focus on essential investor information. 

• Ensuring better integration with ongoing initiatives to reduce corporate sustainability reporting burdens. 

A notable development is the exploration of a product categorization system for investments making ESG or sustainability-related claims. These potential categories would differentiate between products actively contributing to sustainability objectives, transition-focused strategies, or other ESG approaches. 

The Commission aims to publish the updated SFDR proposal in Q4 2025. The revision reflects the EU’s ongoing effort to balance financial market efficiency with ambitious ESG commitments and its overarching carbon neutral strategy. Financial institutions, investors, and ESG stakeholders are encouraged to participate in the call to help shape the next phase of sustainable finance regulation in Europe. 

Sources : 

https://www.esgtoday.com/eu-commission-launches-call-for-evidence-to-simplify-and-update-sfdr-regulation/ 

https://www.responsible-investor.com/european-commission-launches-call-for-evidence-on-sfdr-simplification/ 

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