As the European Commission prepares to publish its review proposal of the Sustainable Finance Disclosure Regulation (SFDR), BETTER FINANCE, the European Federation of Investors and Financial Services Users, calls for reforms that genuinely strengthen transparency and investor protection, while cautioning against measures that could weaken these essential objectives.
For individual investors, clarity and trust must remain paramount. The review should reinforce – not dilute – transparency and must not introduce further ambiguity into an already complex framework.
Our priority is safeguarding the interests of individual investors. Any reform that risks undermining clarity, trust, or genuine sustainability progress must be firmly resisted.
Avoiding a weakened “ESG collection” category
Creating or retaining a broad “ESG collection” or similar catch-all category for products that merely exclude harmful investments or apply vague ESG criteria would erode transparency. Such a framework would allow funds with limited or unclear sustainability impact to be marketed as ESG-friendly, perpetuating confusion and the greenwashing risks that have plagued the current regime.
Ensuring credible engagement for transition category
Transition-labelled products must demonstrate genuine, mandatory engagement with investee companies. Allowing voluntary or symbolic engagement while claiming to drive sustainability transitions would mislead investors and fail to deliver real-world impact. Credible engagement must be a non-negotiable element of transition investing.
Clarifying terminology and categories
Investors must be able to distinguish clearly between genuinely sustainable funds and those marketed under passive ESG labels. The boundary between “sustainable” and any broader ESG classification must be precise. Persisting with vague definitions will mislead investors, erode trust, and undermine the purpose of the SFDR.
Keeping the retail investor at the centre
The consumer’s perspective must remain at the core of the SFDR revision and not be treated as a secondary concern, especially considering that only a limited portion of household savings — around 15.4% in early 2025 — is invested in Europe’s capital markets. This highlights a substantial opportunity to redirect future savings — currently estimated at €35 trillion — towards more productive investments.
Our warning to policymakers
If the SFDR review leads to weak definitions, optional obligations, or broad categories without meaningful criteria, the consequences will be clear:
- continuing investor confusion and mistrust in “sustainable” investment products;
- poor differentiation between funds with real positive impact and those merely ticking boxes;
- heightened greenwashing risks;
- and ultimately, a failure to channel capital effectively towards a genuine net-zero, sustainable economy.
BETTER FINANCE urges the European Commission and co-legislators to ensure that the SFDR review:
- does not institutionalise a vague “ESG collection” category;
- requires credible, mandatory engagement in transition-labelled products;
- establishes clear terminology and non-overlapping categories;
- eradicates the weaknesses that enabled past greenwashing;
- and keeps retail investor protection at the forefront of reform.
Only a robust, transparent, and investor-centric framework can rebuild trust and deliver genuine sustainability outcomes. Anything less would be a missed opportunity, and a step backwards.
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