The Sustainable Finance Disclosure Regulation (SFDR), which has been in place since March 2021, establishes the standards by which asset managers and other financial intermediaries must inform investors regarding the adequate sustainability practices which are to be adopted within the European Single Market.
In its continued attempt to prevent greenwashing within the Single Market, the European Commission has issued both a public and a targeted consultation, reflecting its ongoing commitment to creating a robust sustainable finance framework which simultaneously accommodates the needs of stakeholders and financial market participants alike. In this way, the consultation process acts as an effective tool which may be employed to assess any potential shortcomings from market participants.
Whereas the public consultation is directed at the general public, the targeted consultation is a more detailed instrument which addresses financial market participants, public authorities, national competent authorities and investors. The targeted consultation on the other hand is a more fine-tuned document which seeks to engage investors and asset managers and seek their input regarding which categories of financial products should fall within the scope of this regulation, as well as the practicality of making website disclosures public in view of the heightened transparency obligations posed by this Regulation.
The European Commission has set a deadline of 15th December 2023 for feedback appertaining to the four areas addressed in the consultations which pertain to the current requirements of the SFDR which its interaction with other sustainable finance legislation, potential changes to disclosure requirements for financial market participants and the potential establishment of a categorization system for financial products.
It is expected that the European Commission's final proposals will be revealed in Q2 of 2024.
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