The Omnibus dust has not yet settled, or the European Commission has already published its next major proposal in late November, for revisions to the Sustainable Finance Disclosure Regulation (SFDR). The SFDR was one of the first building blocks of the European Sustainable Finance Framework in 2019. Because it regulated transparency around sustainable financial products by law, the SFDR made an important contribution to the further integration of sustainability into financial products and services. In practice, however, imperfections soon came to light. So it was high time to better align the SFDR with the needs of customers and providers of financial products.
The European Commission has listened carefully to market feedback. The proposal focuses on, among other things:
- Clearer product categories based on minimum criteria for each category;
- Simpler transparency requirements, with a strong focus on product-related sustainability information;
- Avoiding duplicate reporting burdens, and
- Improved alignment with existing regulations, such as reporting standards (ESRS) and ESMA's guidelines for sustainable fund names.
At the same time, we see that important areas of concern remain. For example, although the SFDR contributes to comparability between sustainable products, the negative impact of other products now remains largely out of the picture. The availability and quality of data also remains an area of concern, especially if the Omnibus means that fewer companies will be reporting on their sustainability performance. It is therefore important that clear requirements are also set for ESG data providers (the suppliers of sustainability data), which are expected to play a larger role. Finally, it is important that product categories provide a good balance between ambitious sustainability goals on the one hand and practical feasibility on the other. The challenge will be to maintain a certain degree of flexibility in further elaboration, but at the same time avoid the risk of, for example,
The European Commission's proposal was sent directly to the European Council and the European Parliament. They are expected to begin examining the proposal in the first quarter of 2026 in preparation for further negotiations.
This column was written by Ron Gruijters, Manager of Sustainable Finance at DUFAS.
