European Commission urged to improve stringency of SFDR classifications to fight greenwashing

  • ACCA and CISI call for European Union regulations to be more effective in promoting sustainable finance.
  • Greenwashing rules are a potential barrier to entry and improvements are recommended to drive meaningful investment.


In a response to the European Commission’s Targeted Consultation Document: Implementation of the Sustainable Finance Disclosures Regulation (SFDR), ACCA (the Association of Chartered Certified Accountants) and CISI (the Chartered Institute for Securities & Investment) say that the European Commission (EC) has an opportunity to influence wider global regulations including SEC greenwashing rules, using the lessons learnt from the SFDR and other jurisdictions’ regulatory successes in this space.

ACCA and CISI say that to ensure effective regulation, the SFDR needs greater guidance and clarification. The response was informed by the two bodies’ policy positions, sustainability focused engagement across the EU and UK, and roundtable discussion.

Jessica Bingham, policy and insights lead, (EEMA & UK), ACCA, said: “We recognise that SFDR has driven increased transparency for investors, enabling them to make informed decisions based on the sustainability practices of asset managers and the environmental, social, and governance (ESG) characteristics of investments.

“It has led to greater accountability for asset managers and a stronger emphasis on ESG integration in investment decision-making processes. As we shift to genuine impact investment, asset managers are now recognising the value of impact investing as a means to fulfil their fiduciary duty to investors, while also contributing to societal and environmental progress.”

However, adhering to the SFDR’s extensive disclosure requirements can be costly for asset managers, as it requires gathering and analysing vast amounts of ESG data, developing and implementing new reporting systems, and training staff on the regulation’s intricacies. This can put a strain on asset managers’ budgets and limit their resources for other critical initiatives. In some scenarios this has led to sustainability being the first area to cut.

George Littlejohn, CISI senior adviser, said: “ACCA and CISI question the extent of positive impact that the SFDR’s mandatory disclosure requirements have had. We believe that in many ways the nature of the regulation has hindered some firms as opposed to inspiring better practice and investment.

“Despite its positive impacts, the Sustainable Finance Disclosure Regulation (SFDR) has also been met with some criticism and concerns.”

The SFDR relies on the availability of high-quality, consistent ESG data to effectively inform investor decision-making and evaluate asset managers’ sustainability practices. However, the current state of ESG data is often fragmented, inconsistent, and lacking standardised definitions. This can make it difficult for asset managers to accurately assess their ESG exposure and report on their performance.

ACCA and CISI acknowledge that this will improve over time, and the introduction of the Corporate Sustainability Reporting Directive will assist in taking significant strides in the right direction. However, there will continue to be a heavy reliance on estimates and challenges will remain in gathering, measuring and analysing non-financial data. This translates across the non-financial reporting sphere and both ACCA and CISI recognise their role in assisting their members through this transition to ensure relevant capacity building and upskilling.

The current SFDR has been a first move in establishing criteria to combat greenwashing. However, it is not at present fulfilling its potential to be effective in promoting sustainable finance. ACCA and CISI urged the EC to consider steps such as:


  • Adopt a transition-focused approach to the SFDR.
  • Introduce more labels for different types of sustainable investments.
  • Phase in the implementation of the SFDR over time.
  • Create more flexibility in the SFDR.
  • Reassess the hierarchy of the labels.
  • Move beyond climate-focused sustainability.


This could enable a more sustainable financial system that aligns with the Paris Agreement and the Sustainable Development Goals.

Visit ACCA’s website for more information.