The EU Platform on Sustainable Finance (PSF) has outlined a three-tier categorisation scheme in response to the European Commission’s (EC) review of the Sustainable Finance Disclosure Regulation (SFDR). The PSF, which advises the EC on sustainable finance, called for a “smooth transition” from the existing disclosure regime, factoring in the impact on existing offerings, as well as the sustainability preferences of investors investing in such products. The proposed scheme would include three strategies: sustainable; transition; and ESG collection, with all other products identified as “unclassified”. SFDR has been under review since a consultation conducted the EC found no clear market preference between formalising Article 8 and 9 as product categories or moving to new criteria more closely aligned with the UK’s Sustainability Disclosure Requirements fund labels. Under the PSF proposal, sustainable strategies would include EU Taxonomy-aligned investments or sustainable investments with no significant harmful activities, while transition strategies would support the transition to net zero and a sustainable economy, avoiding carbon lock-ins, in line with EC recommendations. ESG collection strategies would exclude significantly harmful activities, investing in assets with better environmental and/or social criteria or applying various sustainability features. The PSF said the scheme was focused on linking financial products to client perspectives, allowing for differentiation between products that can “largely be considered sustainable through their solutions or practices”. Earlier this month, Mathilde Loussert, Policy Officer at DG FISMA, the EC body for financial stability, financial services and the Capital Markets Union, confirmed it is developing new policy proposals. Separately, the PSF proposed two voluntary transition benchmark labels – with and without exclusions – to highlight use of the EU taxonomy in shaping climate and environmental benchmarks as well as in transition finance.
