News 30/05/25

AFM to Commission regarding revision of SFDR: focus on easy product categories

In its response to the Call for Evidence by the European Commission on the Sustainable Finance Disclosure Regulation (SFDR), the AFM highlights main areas for simplification of the framework. The revision should include the introduction of two product categories: sustainable and transition. The AFM also points out the risks associated with a potential third “light” ESG product category. The Commission asked for input for a review of the SFDR planned later this year.

In short

The revised framework should be easy to understand and easy to implement for all stakeholders.
Focus on two main product categories with credible ESG ambitions: sustainable and transition.
We see risks for investors in the policy proposal of a third light or ESG collection category.
AFM, German BaFin and Austrian FMA have co-signed letter to the Commission highlighting importance of product categories and the risks of a third category.

Focus on two main product categories with credible ESG ambitions

In the view of the AFM, the revised framework should be easy to understand and easy to implement for all stakeholders. The creation of reliable, clear and enforceable regulatory product categories serves both these needs and would constitute a great improvement.

The scope of categories should focus on two main categories with credible ESG ambitions: sustainable and transition. These should have clear minimum quality requirements, accompanied by related disclosure requirement. In the Annex to the response, the AFM provides suggestions on what these requirements could be.

Risks for investors

The AFM also points out risks for investors in the policy proposal of a third light or ESG collection category. In the case this becomes part of the review proposal, investors should be enabled to clearly understand the limited ambition of such a product, through proper naming of the category and meaningful minimum requirements. A catch-all category for products with only very limited ESG aspects and no clear sustainability characteristics should be avoided.

In addition to the AFM’s direct response to the Call for Evidence, the AFM has co-signed a letter with its German and Austrian counterparts – the BaFin and the FMA – in which the above messages on credible product categories are highlighted. We flag the importance of a product category regime which is appropriate for the target groups. We strongly encourage testing of the potential future product categories with retail investors and market participants.