A summary for the European Commission of feedback to its consultation on the future of its flagship sustainable finance disclosures regime has confirmed an industry split about what the basis should be for a new product categorisation system.

The summary report also highlighted that while widespread support exists for the broad objectives of the Sustainable Finance Disclosure Regulation (SFDR), opinions are divided regarding the extent to which the regulation has achieved these objectives during its first years of implementation.

The SFDR disclosure regime has been in application since March 2021 and has been a source of much debate since it launched. In December 2022, commissioner Mairead McGuinness announced an assessment of the framework to assess potential shortcomings, with the consultation for this closing in December last year.

According to the summary of respondents, there is strong support for a voluntary sustainable product categorisation system regulated at European Union level, although there is no clear prefence for one of the two proposed approaches – creating labels on the basis of fleshed out versions of Articles 8 and 9 or creating a labelling system on the basis of something entirely different.

The SFDR consultation feedback report also relayed that 89% of respondents consider that the objective to strengthen transparency through sustainability-related disclosures in the financial services sector is still relevant today.

However, 77% of respondents also highlighted key limitations of the framework such as lack of legal clarity regarding key concepts, limited relevance of certain disclosure requirements and issues linked to data availability.

According to many respondents, these limitations have hindered the effectiveness and usability of the framework.

The report also said there was consensus on the need to ensure consistency across the wider EU sustainable finance framework.

Market views were split over the relevance of the SFDR entity-level disclosures, for example on remuneration policies (39% in support and 26% against).

The majority (56%) of respondents support setting uniform disclosure requirements for all financial products offered in the EU, irrespective of their sustainability claims. This is something the Principles for Responsible Investment has called for.

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