The French Financial Markets Authority has published 14 recommendations to inform the European Union’s review of the Sustainable Finance Disclosure Regulation, focusing on how the proposed Sustainable and Transition product categories should assess transition plans and report principal adverse impacts. The report, prepared by the authority’s Sustainable Finance Consultative Commission and approved by its board, seeks to make the proposed SFDR 2.0 framework operational while aligning it more closely with corporate sustainability reporting standards. For Transition products, the authority recommends assessing plans against five minimum criteria: use of a recognized Paris Agreement compatible framework whose application has been audited, transparent emissions reduction targets, consistency between past performance and forward trajectories, concrete actions and financial resources, and disclosure of exposure to fossil fuels and other high impact sectors. The criteria should draw on revised European Sustainability Reporting Standards, although compliance with Corporate Sustainability Reporting Directive disclosure requirements would not by itself establish a plan’s credibility. Scope 3 emissions should generally be included, with requirements reflecting differences in data quality, responsibility and companies’ ability to influence emissions. For principal adverse impacts, the report proposes a limited mandatory set for Sustainable and Transition products comprising five common indicators and eight sector specific indicators that would apply when exposure to high climate impact sectors exceeds a threshold to be set at Level 2. Indicators should generally be aggregated at portfolio level, aligned with European Sustainability Reporting Standards and relevant exclusion policies, and supplemented where needed by qualitative explanations. The authority also recommends removing the optional indicator baseline and conducting an impact assessment before the Level 2 indicators are finalized.
French Financial Markets Authority issues 14 recommendations on transition plans and adverse impact indicators in the SFDR review
The French Financial Markets Authority has issued 14 recommendations for the EU review of the Sustainable Finance Disclosure Regulation. It proposes five minimum tests for credible transition plans and a limited mandatory set of principal adverse impact indicators for Sustainable and Transition products. The indicators would include five common and eight conditional sector specific measures, aligned where possible with European sustainability reporting data.