Complexity of SFDR risks stalling green finance progress
The Association of Chartered Certified Accountants (ACCA) has called on the European Commission (EC) to simplify its Sustainable Finance Disclosure Regulation (SFDR), warning that its current complexity risks undermining its own aims.
In a formal response to the EC’s ongoing consultation on SFDR revisions, ACCA welcomed the objectives of the regulation but said the “granular and complex” requirements are placing an unnecessary strain on firms and deterring progress in sustainable finance.
“Adhering to the SFDR’s extensive disclosure and reporting requirements necessitates gathering and analysing vast amounts of ESG data, which can be resource intensive,” the body stated. “This can lead to sustainable financial products being deprioritised.”
The SFDR was introduced to increase transparency around ESG investments, clamp down on greenwashing and integrate sustainability into investment decision-making. But ACCA says the administrative burden is disproportionately affecting smaller asset managers, discouraging wider ESG adoption and creating a barrier to entry.
The body is also calling for stronger enforcement mechanisms to ensure compliance, clearer guidance on the ‘do no significant harm’ test, and more balanced integration of social alongside environmental factors.
“The nature of the regulation and the associated administrative costs of disclosure is hindering the sustainability practices of some firms,” the ACCA noted, urging the EC to adopt a phased, transition-focused approach with increased flexibility.
The ACCA response also highlights the need for clearer product categorisation, stating that the existing Article 8 and 9 distinctions are too stringent and confusing for investors. Downgrades from Article 9 to Article 8 have become more prevalent, in part due to ambiguity in classification criteria.
It recommends aligning the SFDR more closely with the UK’s Sustainability Disclosure Requirements (UK SDR) to improve interoperability and reduce regulatory fragmentation.
“Now is the time for the EC to use its first mover advantage,” said Joe Fitzsimons, ACCA’s Regional Lead Policy and Insights for the UK and EEMA. “The revision process should be used as an opportunity to influence wider global regulations.”
The consultation closes on 15 July 2025.
