Dutch Authority for the Financial Markets urges European Commission to introduce sustainable and transition SFDR product categories and cautions on a third light ESG category

The Dutch Authority for the Financial Markets (AFM) has responded to the European Commission’s call for evidence on revising the Sustainable Finance Disclosure Regulation (SFDR), urging a framework that is easy for all stakeholders to understand and implement and that centres on two regulated product categories. AFM argues the review should focus on introducing ‘sustainable’ and ‘transition’ categories with credible ESG ambitions, supported by clear minimum quality requirements and linked transparency obligations, and provides suggestions on potential requirements in an annex. It also highlights investor risks from creating a third ‘light’ or ‘ESG collection’ category, warning against a catch-all bucket for products with only limited ESG aspects and no clear sustainability characteristics, and stating that any such category would need clear naming and appropriate minimum requirements to ensure investors understand its limited ambition. AFM also co-signed a joint letter with Germany’s BaFin and Austria’s FMA stressing the importance of product-category rules that fit the target audience and encouraging testing potential categories with retail investors and market participants. The European Commission’s SFDR revision is planned for later in the year.