Background
This proposal stems from a broad mandate issued by the European Commission to the European Platform on Sustainable Finance (“EUPSF”) - a consultative body- through a public consultation process launched in September 2023. In response, the EUPSF provided feedback on the SFDR Level 1 advocating for a fundamental reform of the framework.
Earlier, in July 2023, the EUPSF had already signalled the need for change in its “SFDR RTS Brief”, reinforcing the call for a more effective and transparent regulatory structure.
Regulatory concerns around SFDR have also been raised by European regulatory bodies. In June 2024, the European Supervisory Authorities (“ESAs”) issued a statement echoing the need for significant revisions to the regulatio
Why is a new categorisation proposed?
In accordance with the EUPSF, the SFDR has been instrumental in improving transparency around sustainability-related financial products. However, its implementation has led to inconsistencies in market interpretations, varied national labelling regimes, and a lack of clarity for investors.
The proposed categorisation framework seeks to address these challenges by providing a clear and structured approach to classifying financial products based on their sustainability objectives. It introduces three primary categories to better structure different sustainable investment strategies:
