Eurosif response to the ESAs’ joint consultation on the review of the SFDR Delegated Regulation

Eurosif welcomes the ESAs’ proposals for a review of the SFDR Delegated Regulation aiming to improve the usability, transparency and coherence of the current SFDR framework.

• • Eurosif supports the ESAs’ proposals on additional mandatory and opt-in social PAI indicators to the extent their formulation is appropriately tailored for investment purposes. Social considerations are crucial to ensure a “just transition” towards sustainability. Therefore, social and environmental indicators should be considered on an equal footing.
  • Regarding the existing indicators, we welcome the proposal to refer to UN Guiding Principles for Human Rights rather than UN Global Compact principles. We also suggest clarifying the application of indicators referencing international standards (i.e. the OECD Guidelines for MNE and UN Guiding Principles).
  • To enable a seamless application of SFDR, the European Sustainability Reporting Standards (ESRS) must mandate investee companies to disclose the information that is necessary to consider the environmental and social PAI indicators.
  • Eurosif agrees with the ESAs’ assessment of the “Do No Significant Harm” (DNSH) principle and concurs that its application should be enhanced. There are merits in further improving consistency between the SFDR and the EU Taxonomy frameworks, despite their existing structural differences. To that end, however, the EU Taxonomy framework would need to be extended to cover environmentally harmful activities and social objectives.
  • Eurosif welcomes the ESAs’ proposals for additional product-level narrative disclosures on GHG emission reduction targets as well as the distinction between portfolio-level and investee-company level decarbonisation objectives. These disclosures should also specify when a combination of different approaches is taken to reach decarbonisation targets.
  • Eurosif is supportive of the ESAs’ proposals to simplify precontractual and periodic documentation templates in view of making the information easier to understand for retail investors.
  • The ESAs’ attempt to fix some of the current framework’s technical challenges with reviewing the RTS is also welcomed by Eurosif. However, a fully-fledged review of SFDR level 1 is necessary to address the most fundamental issues. Eurosif made several proposals to that end in its report of June 2022. Consistency with other related ESAs’ workstreams, e.g. on greenwashing and fund names, should also be stressed.

Contact Details

Pierre Garrault - pierre.garrault@eurosif.org