Complexity of SFDR dangers stalling inexperienced finance progress

The Affiliation of Chartered Licensed Accountants (ACCA) has referred to as on the European Fee (EC) to simplify its Sustainable Finance Disclosure Regulation (SFDR), warning that its present complexity dangers undermining its personal goals.

In a proper response to the EC’s ongoing session on SFDR revisions, ACCA welcomed the targets of the regulation however stated the “granular and complicated” necessities are putting an pointless pressure on corporations and deterring progress in sustainable finance.

“Adhering to the SFDR’s in depth disclosure and reporting necessities necessitates gathering and analysing huge quantities of ESG information, which may be useful resource intensive,” the physique acknowledged. “This could result in sustainable monetary merchandise being deprioritised.”

The SFDR was launched to extend transparency round ESG investments, clamp down on greenwashing and combine sustainability into funding decision-making. However ACCA says the executive burden is disproportionately affecting smaller asset managers, discouraging wider ESG adoption and making a barrier to entry.

The physique can be calling for stronger enforcement mechanisms to make sure compliance, clearer steering on the ‘do no vital hurt’ check, and extra balanced integration of social alongside environmental components.

“The character of the regulation and the related administrative prices of disclosure is hindering the sustainability practices of some corporations,” the ACCA famous, urging the EC to undertake a phased, transition-focused method with elevated flexibility.

The ACCA response additionally highlights the necessity for clearer product categorisation, stating that the prevailing Article 8 and 9 distinctions are too stringent and complicated for buyers. Downgrades from Article 9 to Article 8 have develop into extra prevalent, partly as a result of ambiguity in classification standards.

It recommends aligning the SFDR extra intently with the UK’s Sustainability Disclosure Necessities (UK SDR) to enhance interoperability and scale back regulatory fragmentation.

“Now could be the time for the EC to make use of its first mover benefit,” stated Joe Fitzsimons, ACCA’s Regional Lead Coverage and Insights for the UK and EEMA. “The revision course of must be used as a chance to affect wider world laws.”

The session closes on 15 July 2025.