TILEC Seminar: Enrico Partiti | Addressing the Flaws of the Sustainable Finance Disclosure Regulation

Abstract

The EU Sustainable Finance Disclosure Regulation (SFDR) establishes disclosure requirements to tackle greenwashing and ensuring transparency for financial products. Contextualising the assessment based on literature on disclosures and indicators in the field of sustainability, as well as sustainability due diligence, this contribution analyses the SFDR disclosure requirements and its key definitions. It shows that the SFDR does not require that financial market participants (FMPs) cease or remedy the principal adverse impacts connected to their investments. The definitions of ‘promoting environmental and social characteristics’, ‘sustainable investment ’and its requirement of ‘do no significant harm ’are extremely open-ended and have not prevented FMPs from including investments harmful to sustainability such as oil and coal. The disclosure of complex ‘proxies’ for sustainable performance, such as investment policies and strategies, as well as a limited use of benchmarked information about positive and adverse sustainability impact, casts doubt about the extent to which disclosed information can be understood and effectively drive investors towards sustainable investment products. Enabled by these shortcomings, FMPs started using the SFDR as a label to claim that their products are ‘sustainable’. This contribution illustrates how the SFDR could be amended to introduce elements that would better align it with the practice of sustainability due diligence under the future Corporate Sustainability Due Diligence Directive and bring it closer to a labelling regime signalling products with higher sustainability credentials - while still offering investors necessary sustainability-related information about products and entities.

Speaker: Enrico Partiti

Time: 10:45-11:45 hrs

Host: Konrad Borowicz
Moderator: Konrad Borowicz