Grondige herziening SFDR-regels nodig

The Dutch Federation of Pension Funds responds to the targeted SFDR consulation (please note Event ID#22926) in a position paper for a fundamental review of the SFDR to better align with pension funds‘ objectives. The federation supports the SFDR’s transparency goals and the transition to a sustainable economy. They highlight the sector’s strong focus on sustainability, with a majority of participants enrolled in compliant pension funds.
The Pension Federation highlights various problems in the current SFDR Level 1 framework:
1. Article 8 functions both as a disclosure tool and a label, AFM argues thus for alignment of Article 8 and 9 classifications with actual sustainability characteristics to prevent greenwashing. To address this, the paper suggests disentangling disclosure and labelling, clarifying the purposes for different stakeholders, including supervisors, professional investors, retail investors, and pension fund participants. The initial intent of addressing a principal-agent problem with enhanced disclosure is deemed problematic, as insights from behavioural economics suggest more information doesn’t necessarily lead to a better understanding.
2. The SFDR’s function as a label is worsened by the lack of clear definitions for crucial concepts, particularly „sustainable investments.“ While such ambiguity might be acceptable in a pure disclosure framework, the ESAs have made the proportion of sustainable investments a central metric in Article 8 product disclosures, intending for the reporting to be comparable, which is currently not the case. To address this, the SFDR should establish a common dictionary for actors throughout the investment chain to ensure consistent discussions on sustainability aspects. While the approach works well for PAIs, the lack of a unified understanding of „sustainable investments“ increases the risk of intentional or unintentional greenwashing.
3. The SFDR’s horizontal approach poses communication and implementation challenges for pension funds. While cross-sectoral comparability was considered crucial, the framework, designed with retail investment funds in mind, doesn’t align well with the unique characteristics of Dutch pension funds. Participants have no choice and are mandated to enrol, when signing a job contract, making thus the provided SFDR information less actionable. The complexity of Article 8 information deters participants, and the absence of a precontractual phase hinders its effectiveness. Additionally, pension funds invest in diverse asset classes within a single „product,“ presenting challenges in aggregating PAI disclosures and implementing the good governance test required under Article 8.
4. The current focus on sustainable economic activities through SFDR and Taxonomy is criticized for not adequately promoting the transition away from polluting technologies. While these frameworks set high standards, only a small part of the economy meets them, and investments in Taxonomy-aligned activities remain limited. Pension funds, under IORP2, must maintain diversified portfolios, hindering exclusive investment in sustainable activities.
5. Persistent data availability and quality issues are noted in the context of reporting requirements introduced by the EU, particularly under the SFDR for FMPs, which preceded the establishment of the CSRD, creating challenges for compliance. The current state of data quality from investee companies, data providers, and FMPs varies significantly across indicators and jurisdictions and there is a principled concern that entities should only be subject to requirements that they can feasibly comply with.
The Pension Federation advocates a review of the SFDR to enhance transition finance, provide tailored information, and reduce the risk of greenwashing. Key recommendations include removing Article 8 and 9, introducing voluntary categories/labels, setting minimum requirements for all products with proportionality and abandoning the horizontal approach. The review aims to address unintended consequences, complexities, and challenges in promoting sustainability, particularly in pension funds. It emphasizes the need for nuanced and sector-specific regulations, voluntary categories, and proportionate disclosure requirements for all financial products. Additionally, it calls for careful consideration of the interplay between SFDR and other regulations and compatibility with the CSRD to avoid unintended consequences and discrepancies in reporting standards.