In a move that the industry has long been awaiting, the European Commission has initiated a far-reaching consultation and review of the Sustainable Finance Disclosure Regulation (SFDR), a process that could mark steps towards a SFDR 2.0. This in-depth report from Allen & Overy LLP sheds light on this development, detailing both how the current situation evolved and what we might expect to see in the future.
The SFDR, put into effect to increase the transparency of how sustainability risks are integrated into investment decisions, has been under review for some time. The European Commission’s recent consultation is a significant part of this process, providing the Commission the opportunity to listen to industry, consumer and public feedback on the regulation’s practical application.
Though the current status of SFDR is yet to completely become clear, there are a few conceivable scenarios for what SFDR 2.0 might look like. Some predict stricter regulations, specifically in sectors that have been historically resistant to change. There may also be further pushes for transparency, making it easier for stakeholders to understand how their investments are being utilized.
Further feedback from industry insiders and experts, as well as the results of the Commission’s consultation, will no doubt shape the form SFDR 2.0 will eventually take. What is clear at this point in time is that changes are on the horizon, and those in the legal profession dealing with corporate law and finance should remain up-to-date on this evolving situation.