EU Platform on Sustainable Finance report on categorization of products under Sustainable Finance Disclosure Regulation

The EU Platform on Sustainable Finance has published a report on the categorization of products under the Sustainable Finance Disclosure Regulation. The Platform recommends categorizing products with the following sustainability strategies:

• 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, in line with the European Commission's recommendations on facilitating finance for the transition to a sustainable economy; and
• ESG collection — excluding significantly harmful investments/activities, investing in assets with better environmental and/or social criteria or applying various sustainability features. All other products should be identified as unclassified products.

The Platform recommends evaluating whether the scope of the categorization should go beyond the current SFDR, potentially categorizing all products and services under sustainability preferences in the Insurance Distribution Directive and the Markets in Financial Instruments Directive. The Platform also recommends that the European Commission develops a common understanding on impact investing in the EU sustainable finance framework and how it relates to the EU Taxonomy and thereafter determines how to integrate it in the categorization scheme.

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