The German financial supervisory authority BaFin is in favour of introducing a transition label for investment products, according to Rupert Schäfer, the regulator’s executive director for strategy and policy.

“We think that for fund investments, for example, products can be explicitly marketed in a transition product category,” he said, speaking at a sustainable investing event organised by the Green Party in the German Parliament this week.

The transition must be “plausible” to add those products to the transition category, he added.

Schäfer made his remarks in reference to the work programme of the next EU Commission, which will be appointed after the summer’s European elections, and the role that Germany will play in shaping new regulations.

He said there was “potential to improve rules”, although that did not mean that the existing rules were bad. “It is a complex [regulatory] system”, he added.

The EU does not have a labelling regime for sustainable finance investment products although the Sustainable Finance Disclosure Regulation (SFDR) has been used as such by the industry.

The Commission is currently considering revising SFDR, and has proposed the potential establishment of a categorisation system with a label for products with assets or portfolios that seek to improve their sustainability performance over time.

BaFin is not the only supervisor to come out in support of a transition category. In the Netherlands, AFM has backed the ditching of the existing SFDR Article 8 and 9 categories and said the EU should “introduce sustainable product labels that investors can understand, such as ‘transition’, ‘sustainable’ and ‘sustainable impact’”.

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