Several European financial associations have written to the European Commission to call for better coordination in the review and publication of new rules for the Sustainable Finance Disclosure Regulation (SFDR).

The European Commission is currently reviewing the draft Regulatory Technical Standards (RTS) released by the European Supervisory Authorities (ESA), as well as undertaking a broader and more fundamental review of the SFDR.

The letter, penned by the European Fund and Asset Management Association (EFAMA), European Banking Federation (EBF), Insurance Europe, European Savings and Retail Banking Group (ESBG), Alternative Investment Management Association (AIMA), Association for Financial Markets in Europe (AFME), and the European Association of Cooperative Banks, raised concerns about the “lack of coordination” between these two review projects.

It stated that this put investors’ confidence in sustainable investment solutions and the reliability of EU standards for sustainable disclosures at risk.

According to the findings of consumer tests conducted by the ESAs, investors still struggle to understand the aim and context of disclosures, as well as their content.

The associations said it was critical that the two reviews are fully coordinated to guarantee legal certainty and deliver a successful legislative process, preventing overlapping and doubling efforts.

They urged the European Commission to delay the adoption of the RTS measures and reconsider changes to SFDR holistically.

Furthermore, the associations argued that the industry would need appropriate grandfathering measures, and at least a year for implementation once any SFDR changes are published, to be adjusted upwards to align with the availability of underlying data and the breadth of the changes.

“The SFDR is a part of a larger set of regulatory initiatives (including the Corporate Sustainability Reporting Directive, Taxonomy Regulation, Corporate Sustainability Due Diligence Directive and European Single Access Point) which are interconnected, but the infrastructure between these different sets of regulation is still not in place and full Principle Adverse Impact reporting only started in June 2023,” EFAMA stated.

“Hence, making changes to standards that have just been implemented is still premature.

“Instead, further feedback from the implementation of current requirements, and a consolidation exercise of the data infrastructure between the different sets of regulation, should take place to ensure that the regulation already in force works as intended, fulfils its purpose and creates value for investors.

“A period of stability is necessary to avoid confusion for financial market participants, consumers and investee companies.”

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