A leaked copy of the European Commission’s legislative proposal for amendments to the Sustainable Finance Disclosure Regulation (SFDR) raises major concerns over the future of Europe’s green and transition financing.
In the name of ‘simplification’, the Commission removes an immense number of mandatory disclosures. Worryingly, non-sustainable funds would no longer have to include a disclaimer that they disregard sustainability issues.
The proposal introduces three sustainable fund categories. But with extremely weak criteria for excluding unsustainable companies and no mandatory positive criteria for selecting sustainable companies, it maintains confusion and incoherence, while also failing to provide clarity for individual investors and to prevent greenwashing practices. Such a proposal is set to fail at contributing to closing the investment gap in order to achieve the EU 2030 sustainability objectives, as part of the Savings and Investment Union.
Sebastien Godinot, Senior Economist at WWF European Policy Office, said: “The proposal is riddled with flaws, and the cherry on top is the fact that large-scale investments in fossil fuel expansion are not forbidden in the transition fund category: it provides no guarantee of gradual alignment with the Paris Agreement’s objectives. What sort of ‘transition’ is that?”
Godinot added: “The level of ambition in the text is worse than existing market practice on several counts. Notably, even though it is already common practice for most institutional investors to engage with investee companies, this proposal does not take steps to translate this into a mandatory requirement.”
The European Commission has two weeks to finalise the text of the proposal ahead of its expected presentation on 19 November.
