Proposal for categorisation of products under the SFDR

The EU Platform on Sustainable Finance has published a briefing note for the EU Commission outlining how a categorisation system for sustainable finance products could be set up and calibrated.

The briefing note outlines a proposal for a categorisation scheme and key considerations for the EU Commission as part of the review process to assess potential shortcomings of the SFDR. The categories aim to reflect the overarching sustainability objectives of financial products, focusing on the needs of retail investors. It is further proposed to align sustainability preferences with the categories.

The following product categories with the appertaining sustainability strategies are recommended:

• Sustainable: Contributions through taxonomy-aligned investments or sustainable investments with no significant harmful activities or assets based on a more concise definition consistent with the EU Taxonomy.
• Transition: Investments or portfolios supporting the transition to net zero and a sustainable economy, avoiding carbon lock-ins, per the EU Commission’s recommendations on facilitating financing for the transition to a sustainable economy.
• ESG collection: Excluding significantly harmful investments and/or activities, investing in assets with better environmental and/or social criteria or applying various sustainability features.
• Unclassified products: All other products.

Next step

The Platform on Sustainable Finance will inform about their proposal at a webinar on Tuesday 21 January 2025. The proposal reflects the view of the members of the Platform on Sustainable Finance which is an advisory body with a specific mandate to work with areas of sustainable finance and advise the EU Commission. However, it does not commit the EU Commission currently but will be analysed and viewed by the EU Commission.

Tags:  SFDRSustainability