The EU’s sustainable finance disclosures regulation (SFDR) was not intended to be a “pure labelling scheme”, the head of asset management in the European Commission’s financial services division has said.

Speaking during IPE’s recent ESG Forum, Sven Gentner said it was a bit early to comment on how the SFDR was being applied, but he noted that “it’s becoming a kind of label”, which was not the intention.

“It was never intended to push industry to separate their products into one or the other baskets,” he said.

Under the SFDR, asset managers and other financial market participants have to make different disclosures about different products depending on their ambitions with respect to environmental and/or social considerations.

The transparency requirements in relation to pre-contractual disclosures for the different products are set out under Articles 8 and 9 in the SFDR, and it is now quite common to refer to products by reference to the legislation articles. 

Gentner said “the mere fact we’re giving them names related to the articles shows we didn’t intend this to be a pure labelling scheme”.

“We wanted to make sure that the information presented to investors is more coherent, more uniform, more reliable when it comes to ESG,” he said.

“We wanted to make sure that if you set out to achieve a certain goal, if you sell a product that says I want to be in line with the Paris Agreement, I want to achieve certain things with respect to biodiversity, forestry management, what have you, then you need to be able to back it up.”

A key issue that the industry has been grappling with in relation to SFDR implementation is uncertainty about what constitutes “promoting” in the context of Article 8 requirements.

The European Supervisory Authorities (ESAs) have asked the Commission to clarify this, and Gentner said it was in the process of looking into these questions.

“We hope to publish answers quite soon to give additional clarity, which I hope will be helpful to the marketplace,” he said.

He explained that the process the Commission was following for dealing with the questions meant the College of Commissioners – the body of senior political figures in the Commission – would need to agree with officials’ answers.

This process was underway, he said.

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