SFDR: Three changes to make sustainable finance disclosures useful

Reclaim Finance argues that the current SFDR framework is too vague, leading to confusion and greenwashing. It proposes three key reforms: excluding fossil fuel developers from funds making environmental or social claims, establishing minimum quality requirements for 'green', 'transition', and 'impact' funds, and aligning transparency obligations (PAIs) with advisory processes (MiFID II and IDD) to better reflect investor preferences.

• The current SFDR framework, specifically Articles 8 and 9, lacks clear criteria and definitions, allowing asset managers excessive leeway in fund classification and leading to opaque reclassifications that confuse retail investors and banking advisors.
• Reclaim Finance's 2024 research indicates a systemic issue where funds making sustainable claims remain exposed to fossil fuel developers: 70% of passive funds, 70% of French employee savings funds, and 55% of life insurance products are exposed to companies developing new coal, oil, and gas projects.
• The document argues that any fund making environmental or social claims should exclude companies developing new fossil fuel production projects, suggesting the use of the Global Coal Exit List and Global Oil and Gas Exit List for identification.
• To prevent 'transition' or 'impact' washing, Reclaim Finance proposes specific minimum requirements: 'green' funds must have a minimum green share and deforestation exclusions; 'transition' funds must hold companies with quality transition plans aligned with 1.5°C; and 'impact' funds must define specific KPIs and exclude carbon capture and storage (CCS) linked to fossil fuel production.
• The 'do no significant harm' (DNSH) principle is currently too vague in financial regulation; the author recommends that lawmakers explicitly define harmful activities to help investors identify funds containing them.
• Current Principle Adverse Impacts (PAIs) are too complex for retail investors and fail to reflect essential environmental impacts; they should be updated to allow investors to quickly identify exposure to harmful companies.
• To align transparency with advisory obligations, the document suggests adjusting MiFID II and IDD to require advisors to ask clients specific questions regarding the exclusion of fossil fuel developers, deforestation risks, and the desired share of green assets or verified transition plans.

APA

Reclaim Finance (2024). SFDR: Three changes to make sustainable finance disclosures useful. https://reclaimfinance.org/site/wp-content/uploads/2024/10/SFDR-Review-Advocacy-Note-Reclaim-Finance-September-2024.pdf

Chicago

Reclaim Finance. SFDR: Three changes to make sustainable finance disclosures useful. 2024. https://reclaimfinance.org/site/wp-content/uploads/2024/10/SFDR-Review-Advocacy-Note-Reclaim-Finance-September-2024.pdf.

Wikipedia

{{cite report |author=Reclaim Finance |title=SFDR: Three changes to make sustainable finance disclosures useful |date=September 2024 |url=https://reclaimfinance.org/site/wp-content/uploads/2024/10/SFDR-Review-Advocacy-Note-Reclaim-Finance-September-2024.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{reclaimfinance2024sfdr, author = {{Reclaim Finance}}, title = {{SFDR: Three changes to make sustainable finance disclosures useful}}, institution = {Reclaim Finance}, year = {2024}, month = sep, url = {https://reclaimfinance.org/site/wp-content/uploads/2024/10/SFDR-Review-Advocacy-Note-Reclaim-Finance-September-2024.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }