The European Commission is expected to publish a proposal for the review of the SFDR in Q4 2025. This position paper provides an overview of BETTER FINANCE, BEUC, and Finance Watch proposed adaptations to the SFDR, following recommendations from the Platform on Sustainable Finance to the European Commission. As defenders of individual investors', consumers’ and civil society's interests, we are committed to enabling a more sustainable financial system while ensuring the best interest of European citizens as financial services users.
Proposal
In response to the European Commission’s assessment of the SFDR, the Platform on Sustainable Finance published a briefing note outlining their proposal for a new categorisation system. Aiming to address market fragmentation and enhance individual investor understanding of sustainable investments and needs, the Platform outlines three categories:
- Sustainable: products aligned with the EU taxonomy and sustainable investments
- Transition: investments supporting the transition to a net-zero and sustainable economy
- ESG collection: products excluding harmful investments or applying various sustainability criteria
Within this scope, all other products would be “unclassified”. The proposal also introduces mandatory minimum criteria and binding elements to prevent greenwashing.
We welcome the Platform on Sustainable Finance's proposal on the categorisation of products under the SFDR, and its ambition to address the regulation's shortcomings. In particular, we support the clearer product categorisation, prioritising individual investors' needs at its core. We also appreciate the ambition to tackle the SFDR's flaws, which have negatively affected investors' trust in sustainable and ESG products as well as overall sustainable finance capital flows, due to greenwashing and misselling.
However, as advocates of the best interest of individual investors and consumers, we wish to raise some concerns regarding the ESG collection category, and the framing of engagement as an optional element for investors or their representatives to develop a transition investing strategy.
⬇️Read the full joint position paper below⬇️