Dutch AFM proposes changes to SFDR for clearer sustainability disclosures
In a bid to enhance the clarity of information reported under the Sustainable Finance Disclosure Regulation (SFDR), the Dutch Authority for the Financial Markets (AFM) has proposed some changes.
The proposals, responding to the ongoing review of the SFDR framework by the European Commission, aim to make the framework more meaningful for investors and facilitate the channeling of capital towards sustainable impact investments.
Acknowledging the progress made by SFDR in improving transparency on sustainability matters in financial markets since its inception in March 2021, the AFM highlights persistent challenges. Notably, disclosures, while a significant stride forward, often prove tough for investors, especially retail investors, to comprehend and compare.
As a result, consumers face difficulty distinguishing between products claiming to make an impact and those simply aligned with sustainability values.
The AFM proposes the introduction of three distinct sustainable product labels: “transition,” “sustainable,” and “sustainable impact”. {Ed — Surely “Article 8” and “Article 9” are intuitive and understood by all? 😉 } These labels are designed to provide investors with a clearer understanding of different types of sustainable investment products and whether and how they contribute to impactful change. The AFM suggests specific quality and disclosure requirements tailored to each label to mitigate the risks of greenwashing.
Advocating for a disclosure regime that ensures equity among financial products, the AFM suggests that all financial products, irrespective of sustainable features, should disclose a minimum set of sustainability indicators. This approach aims to assist investors in assessing the most crucial negative impacts of these products.
As conversations around the SFDR framework continue, the AFM invites engagement and discussion on the presented content. The objective is to stimulate a collective dialogue that contributes to a more transparent and impactful sustainable finance landscape.
For more details, you can access the AFM position paper here.
