Too complex, too incomprehensible, too ineffective: the criticism on the transparency requirements for sustainable financial products – more precisely, the Sustainable Finance Disclosure Regulation (SFDR) – is unrelenting. In a study, the Centre for European Policy (cep) calls for a general overhaul – right at the start of the new legislative period.
“Revising the current legal framework is unavoidable in view of the shortcomings that have become apparent in practice. Unfortunately, the EU Commission, European Parliament and Council have completely lost their way,” criticises cep financial expert Philipp Eckhardt, who prepared the study with the support of means from the Badischer Gewinnsparfonds. Eckhardt calls for discrepancies between the SFDR and the Regulation on the Green Taxonomy to be overcome, existing data gaps to be minimised and all investment products, whether sustainable or not, to be treated equally.
The current rules are not only opaque for investors, but also for advisors and providers of investment products. Customers therefore regularly hesitate when it comes to sustainable investments. The Commission therefore wants to revise the SFDR and possibly introduce a categorisation system for sustainable investment products. According to Eckhardt, however, the focus should be on improving the transparency requirements. “The planned categorisation system can only be the second-best solution. If the Commission wants to stick with it, it should at least take into account the 14 criteria developed as part of the study,” says Eckhardt.
Surveys show that the existing EU legal framework on sustainable finance has not yet achieved the desired success and has not substantially increased sustainable investments. “It would therefore be appropriate to revise not only the SFDR but also the other sustainable finance legislation, such as the Regulation on the Green Taxonomy,” Eckhardt demands. The study reveals weaknesses of the SFDR Regulation, examines reform options and develops possible solutions.
The complete cepStudy is currently only available in German. Please do not hesitate to contact us if you are interested in further details about the study beyond the information provided above.
