With trilogue negotiations on the review of the Sustainable Finance Disclosure Regulation (SFDR) now under way, IIGCC has published a position paper setting out investor priorities for a revised framework that is both credible and usable in practice.
The paper welcomes the progress made by the European Parliament and Council. Both have kept a dedicated product categorisation system, including a Transition category that recognises the critical role of investment strategies that finance real-economy decarbonisation. However, important gaps remain. If they are not addressed, they could undermine the integrity and coherence of the rulebook, and investors’ ability to implement it.
IIGCC calls on the co-legislators to:
- Ensure the Transition category is fit for purpose, safeguarding its integrity while facilitating transition finance, by anchoring eligibility in credible, time-bound and measurable transition plans.
- Maintain the Parliament’s safeguards on any opt-out for alternative investment funds available only to professional investors, including a prohibition on sustainability-related fund names.
- Retain product-level engagement disclosures across all three categories on a comply-or-explain basis, focused on how firms apply their entity-level engagement strategies.
- Preserve a limited baseline of decision-useful principal adverse impact indicators, particularly core climate indicators for Transition products, complemented by indicators tailored to each product’s strategy.
- Uphold the inclusion of general-purpose sovereign debt in the Transition category, and extend this to non-EU sovereign debt that meets credible climate criteria.
- Ensure the framework works across all asset classes through tailored Level 2 criteria, and apply the revised Regulation and related changes from a single date.