Debate: Investment practices of sustainable investment funds
Date: THURSDAY, 19 JANUARY 2023
Speaker: Adina-Ioana Vălean
Language: EN

The SFDR started to apply in March 2021. Additional implementing measures have just come into effect on 1 January this year. The SFDR was intended purely as a disclosure regime. The Commission considers that it has been successful in helping structure the way financial intermediaries communicate about the ESG features of financial products they manufacture or sell. However, we are aware that the financial services industry is using it as a labelling scheme instead of as a framework for disclosures.  On question one, on continued greenwashing in financial markets, one of the SFDR’s main objectives is to prevent greenwashing by promoting maximum transparency in financial markets. Transparency means that it is incumbent on each financial intermediary to conduct its own assessment and disclose the underlying methodologies. If there are no minimum thresholds, financial intermediaries can disclose under whichever article they consider best fits their product. This is a critical aspect for supervisors. Several market supervisors have listed SFDR as one of their top priorities for 2023.  Furthermore, we expect that the implementing measures that came into effect on 1 January will significantly increase the industry’s auto—correction and help facilitate supervision. These new implementing measures specify the exact content, methodology and presentation of the information to be disclosed by product manufacturers and distributors. As a result, it will become increasingly difficult for financial intermediaries to make unfunded green claims or to hide that they invest in potentially harmful activities.  On question two, on the need for further regulatory action, we need to take stock of how the SFDR is working two years after it came into force. The implementing measures alone won’t fix all the issues arising from its unintended use by the market. That is why Commissioner McGuinness announced at the last ECON/ENVI Joint Committee in December to launch a comprehensive assessment of the implementation of the SFDR in 2023.  At this stage, two main options could be explored. Accepting the current use by the market of the SFDR as a labelling mechanism: this would require more precise definitions to ensure that the boundary scope of the Light Green Article 8 and the Dark Green Article 9 categories is clear.  Or alternatively, keeping the SFDR focused only on disclosure with uniform requirements for all sustainable financial products and adding a voluntary labelling regime in parallel to allow for the categorisation of sustainable financial products. There will be stakeholder consultation throughout this entire process and Parliament will of course be consulted.  On the third question, on the minimum criteria for Articles 8 and 9, the introduction of minimum criteria for the so-called Light Green and Dark Green Funds is one of the options that we would aim to assess. It should be noted, however, that setting up such minimum criteria involves opening and launching negotiations on the main text of the Regulation. The current rules do not foresee such a mechanism.  So, this being said, I want to thank you for this question and the possibility of this debate on behalf of my colleague, Commissioner McGuinness, and I’m looking forward to the comments of other honourable Members.