BEUC NEWS - 09.03.2022

BEUC – together with a handful of civil society and environmental NGOs – has presented a set of proposals to the European Commission on how to improve the Sustainable Finance Disclosure Regulation (SFDR).

The signatories put forward several recommendations to update the SFDR to resolve issues that currently allow the financial industry to label almost any product as sustainable. Changing this would benefit consumers as they could more easily identify which financial products match their sustainability preferences instead of being sold products that do not have the properties advertised.

The key recommendations include:

• Minimum standards for all financial products claiming to be ‘sustainable,’ or featuring ‘Environmental, Social and Governance characteristics’ – so called ‘dark green’ and ‘light green’ products respectively

• Improved disclosure to ensure consumers know what they are investing in

• Stronger enforcement powers for supervisory authorities, which are currently sorely lacking, to stamp out misleading sustainability claims.

The SFDR was intended to create a degree of transparency about what a ‘sustainable’ financial product really is. Established in 2019, the regulation preceded the EU’s Sustainable Finance Taxonomy – which aims to set out which economic activities are sustainable and so can be advertised to consumers as ‘green’ investments. It was therefore hard to create concrete criteria as there was no reliable catalogue of what is or is not sustainable.

As such, the rules are quite abstract. This means that many investment funds are sold to consumers as ‘sustainable’ by simply excluding something (like coal) and then claiming that they have taken action to be sustainable, despite potentially including investments in other polluting industries like oil or gas.

Read the full recommendations here.