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22/12/2023 Analyse extra-financière

Non-financial reporting: SFAF responds to European consultation on SFDR

The Sustainable Finance Disclosure Regulation (SFDR), which will come into force in March 2021 to harmonize and strengthen transparency obligations for financial market operators, is the subject of a consultation launched by the European Commission. The members of SFAF's Extra-Financial Analysis Committee submitted their response on 15 December, in which they set out their concerns.

Launched on 14 September 2023 by the European Commission, the purpose of the consultation, which concerns level 1 of the SFDR(1) regulation, is to gather feedback from the various stakeholders on the application of the text since its entry into force. The members of SFAF's Extra-Financial Analysis Committee met at the end of November to prepare the response of French financial analysts.

This consultation is divided into four main sections:

  1. The current requirements of the SFDR Regulation;
  2. The SFDR and European legislation on sustainable finance;
  3. Potential changes to disclosure requirements for financial market participants;
  4. The possible implementation of a categorization system for financial products.

Although the SFDR regulation represents a considerable step forward in the world of extra-financial reporting, the members of the SFAF have expressed their concerns about certain aspects of the text.
On sections 1 and 2, they are calling for :

  • Better account to be taken of the costs inherent in the preparation of reporting and the collection of information in order to avoid publication solely for marketing purposes;
  • A redefinition and harmonization of concepts to compensate for the coexistence of two "DNSH"(2) in the regulations and the vagueness of the definition of "sustainable investment".

On section 3, they are calling for :

  • Relevant information requirements at entity level (simply following international guidelines proves insufficient in some cases);
  • Standardized publication requirements at product level;
  • Improved access to information by ensuring that it is publicized and, where necessary, that confidentiality is respected (the ESAP(3) project would facilitate access to information and reduce the risk of duplication);
  • Comparable information (define an identical level of granularity).

On part 4, they propose :

  • The introduction of a categorization system to better distinguish between products covered by Article 8 or Article 9 of the SFDR Regulation;
  • Greater consistency between the information published under the Taxonomy and that published under the SFDR regulation by guaranteeing a minimum level of alignment for products covered by Article 9.

Submitted on 15 December 2023, the SFAF's full response is available via this link in the document base.

(1) Regulation (EU) 2019/2088.
(2) The "Do No Significant Harm" principle is provided for in the SFDR and Environmental Taxonomy Regulations (Regulation (EU) 2020/852).
(3) European Single Access Point: a single European access point that would guarantee access to information on entities' activities and products relating to capital markets, financial services or sustainable finance.

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