European regulators publish joint opinion on assessment of EU regulation on disclosure of information on sustainable finance

The European Supervisory Authorities have published a joint opinion assessing the EU Sustainable Finance Disclosure Regulation. The opinion proposes simplifying product categories under the current rules, following confusion among retail investors about SFDR templates and labelling products as ‘Article 8’ or ‘Article 9’ as a method of ensuring quality, leading to the risk of greenwashing. It argues that disclosures should be jargon-free, allowing investors to understand the underlying sustainability profile of financial products. The ESAs recommend introducing a product classification system based on regulatory categories or sustainability indicators. The ESAs suggest two product categories: ‘sustainable’ and ‘transitional’. It notes the need for a clear definition of ‘sustainability’ that distinguishes between ‘environmentally’ and ‘socially’ sustainable categories. The ESAs strongly recommend that the European Commission ensures that sustainability disclosures meet the different needs of investors and that the Commission implements a sustainability indicator that assesses financial products by indicating whether they are environmentally, socially or both sustainable.

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