Background
The CSA on the integration of sustainability risks and disclosures in investment funds was launched by the European Securities and Markets Authority (ESMA) with the National Competent Authorities (NCAs) in July 2023. The CSA aimed to evaluate whether supervised entities are complying with SFDR disclosure requirements, including taxonomy alignment, ESMA's supervisory briefing principles on sustainability risks and disclosures, and AIFMD/UCITS Directive rules on sustainability risk integration.
The 30 June 2025 Final Report on the 2023-2024 CSA on the integration of sustainability risks and disclosures provides feedback on (i) the integration of sustainability risks and greenwashing risks at entity level, (ii) entity-level SFDR disclosures and (iii) product-level SFDR disclosures.
Scope
ESMA developed a common methodology to conduct this assessment, covering both large and smaller/mid-sized entities across the EU/EEA Member States, with a focus on retail investor-based entities managing Article 8 and 9 SFDR funds. However, funds outside the scope of Articles 8 and 9 SFDR were also in scope to allow assessment of a variety of disclosures. Some NCAs also included funds with net zero or carbon neutrality claims.
Key findings
ESMA highlights several key points in the final report:
- While there is an overall satisfactory level of compliance, the CSA results show that there is room for improvement. In particular, the CSA enabled NCAs to spot vulnerabilities and breaches which supervised entities could address.
- The main issues and vulnerabilities detected by NCAs during the
CSA analysis relate to:
- SFDR disclosures – vague, inadequate, too generic or missing details, with inconsistencies between the various documents requiring SFDR-related disclosures.
- PAI statements at entity level – inadequate level of detail, unsatisfactory explanations and inconsistencies.
- Integration of sustainability risks – lack of policies and escalation procedures in the event of breach.
- Resources – low number of dedicated employees or unsatisfactory level of knowledge.
- Remuneration policies – lack of specific criteria and indicators.
- Controls and processes in place – lack of processes to ensure that ESG strategies are consistent with the characteristics promoted and good governance principles.
- ESG data – lack of verification or review process for external data.
- Auditing system – absence of oversight in the enforcement of internal policies.
- The final report also provides examples of what ESMA considers good practice, below-average practice and non-compliant practice by managers in terms of sustainability risks integration and SFDR disclosures.
- Without confirming what the future of SFDR looks like, ESMA nonetheless indicates that "A future review of SFDR which establishes product categories with clear criteria, as called for in the ESAs' joint Opinion on SFDR and the ESMA Opinion on the functioning of the SF Framework, would mitigate" the challenge posed by the ambiguity of key concepts, which are currently "left to the discretion of market participants".
Next steps
- ESMA encourages NCAs to keep engaging actively with market participants and address any identified weaknesses.
- ESMA and NCAs will keep monitoring compliance by enforcing the sustainable finance framework, preventing greenwashing and enhancing transparency in sustainable investments.
- NCAs should continue rigorous supervision of the current rules, and entities must keep following existing requirements, since changes to the current SFDR framework will not be applicable for some time.
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