With the dawn of the new year, the question on everyone's mind is whether 2025 will see a steep change in SFDR? The Platform on sustainable finance (the Platform), an advisory board to the European Commission (the Commission), seem to think so with their proposal to overhaul the current regime and replace it with a new categorisation system.
The Platform has recommended categorising products with the following sustainability strategies:
Sustainable | Transitioning | ESG Collection |
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It is proposed that products that do not fall within any of the aforementioned categories will be considered "unclassified" and must include a disclaimer stating that:
- The product is unclassified.
- It does not fulfil the standards required for a categorised product; and
- Any ESG characteristics or sustainable or transition features must only be described in the legal documentation.
In addition, managers will no longer be able to opt-out of Taxonomy alignment consideration and disclosure with the proposals suggesting that all products (even unclassified products) are required to report on the following:
- Taxonomy alignment (Revenues and CapEx); and
- PAIs: GHG emissions (1), carbon footprint (2), GHG intensity of investeee companies (4) and UNGPs (10)
What is next?
The Platform proposals are not binding but are similar to opinions provided by the European Supervisory Authorities earlier in 2024. The timeline for SFDR 2.0 is still not set in stone, but the proposals presented by the Platform give the Commission some additional food for thought and potentially a new direction for SFDR in 2025.
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