Joint ICMA response to the European Commission’s targeted consultation on the SFDR


13 December 2023 ICMA submitted today its response to the European Commission’s targeted consultation on the SFDR. behalf of ICMA and its constituents, especially by the Asset Management & Investors Council (AMIC) and the Executive Committee of the Principles.

The letter summarising our key responses and positions as well as the full response form can be found here.

In a nutshell:

  • Current requirements of the SFDR: While the SFDR’s adoption has been positive, it currently fails to fulfil its primary objective of investor protection and helping sufficiently channel capital towards sustainability for various reasons including use of disclosures as labelling, complexity and overload of disclosure requirements, data unavailability, lack of clarity and minimum standards in key regulatory concepts, etc. All these can lead to legal uncertainty, potential greenwashing, and reputational risks.

  • Interaction with other sustainable finance legislation: While the Commission and the ESAs have recently provided various guidance on addressing inconsistencies between different pieces of legislation, there is still a need for further improvement and clarity.

  • Potential changes to disclosures: Going forward, the disclosure requirements and templates should be shortened, streamlined, clarified, made proportionate and focused on most material issues. Within these parameters, there is support for uniform disclosures across all products, regardless of the presence of sustainability claims. Where possible, disclosures should leverage expected data from the application of international standards (e.g., ISSB) and recognise other existing taxonomies.

  • Potential establishment of a categorisation system: Our members clearly and strongly support an EU official categorisation system, however there are divergent views on how to achieve this. In any case, introduction of labels based on investment objectives and intentions should, to the extent possible, leverage the existing requirements and processes that have been resource intensive to implement. We note strong support for a transition-focused Category D. There is also support for Category A and B, but international fragmentation should be avoided in labels’ design. We do not however support the exclusion-focused Category C. Also, while we do not propose any specific criteria for labels at this stage, we present some high-level recommendations and principles to guide the process.

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