Date: 22nd December 2022
Author: BETTER FINANCE

The Briefing Paper by BETTER FINANCE, 2° Investing Initiative and WWF focuses on the Packaged Retail Investment and Insurance-Based Products (PRIIPs) Regulation and provides recommendations for sustainability disclosure.

While a legislative review of PRIIPs is planned, we suggest an omnibus regulation that will effectively harmonise product-level disclosures. The briefing elaborates on one of the recommendations from our joint briefing on a sustainable EU retail investment policy, emphasising clear, standardised, and accessible disclosure of sustainability information for retail investors.

The Commission's Action Plan on Sustainable Finance and the Strategy for Financing the Transition to a Sustainable Economy prioritise mandatory sustainability disclosure. Notably, surveys indicate a strong interest in sustainable investing among retail investors. Therefore, it is crucial to improve sustainability disclosure at the financial product level, enabling informed investment decisions aligned with sustainability preferences.

Regarding the PRIIPs review, we propose the following recommendations:

  1. Integrate critical sustainability information into two sub-sections of the Key Information Document (KID) in a standardised manner.
  2. Provide six indicators in the KID, including disclosure of SFDR article classification, taxonomy alignment, fossil fuel exposure, climate score or Paris alignment, Principal Adverse Impacts, and proportion of underlying companies with climate/sustainability targets and transition plans.
  3. Include a specific section in the KID describing the expected positive or negative sustainability impacts of the fund and supporting evidence.
  4. Recommend a template for sustainability information in KIDs to consolidate the above recommendations.