Burdensome Complexity: Current EU sustainable finance disclosure rules are hindering businesses and deterring private investment in sustainability.
Call for Simplification: The ACCA advocates for simplified, less granular requirements and reduced reporting burdens to achieve effective implementation.
Global Leadership Opportunity: The EU’s revision of SFDR offers a chance to influence global sustainable finance regulations.
The Association of Chartered Certified Accountants (ACCA) has urged the European Commission (EC) to simplify its sustainable financial reporting rules, asserting that their current complexity is impeding businesses’ sustainability efforts. The ACCA believes that streamlining these requirements and easing the reporting burden on companies is crucial for effective disclosure implementation and attracting private funding for a sustainable transition.
In its response to the EC on the revision of the Sustainable Finance Disclosure Regulation (SFDR), the ACCA proposes a “transition-focused approach” that allows for greater flexibility and phased-in implementation. While backing the SFDR’s objectives—promoting investor transparency on sustainability practices, encouraging asset manager accountability, and emphasizing ESG integration in investment decisions—the ACCA highlights significant challenges.
Vikas Aggarwal, Regional Head of Public Affairs, EEMA, ACCA, stated, “At present, the SFDR requirements are too granular and complex. These constraints will prevent the SFDR’s aims and EC’s objectives being fully achieved.”
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The ACCA has identified several key issues within the regulation that need addressing:
Data Overload: The demand for large volumes of data strains asset managers’ budgets, leading to the deprioritization of certain financial products by investors.
Lack of Enforcement: Concerns about non-compliance among some asset managers due to insufficient enforcement mechanisms, prompting the ACCA to call for their introduction.
Exclusion of Smaller Firms: The SFDR’s applicability largely to big asset managers effectively locks out smaller firms with limited resources for compliance.
Unbalanced Focus: The regulation shows a disproportionate emphasis on social factors. More guidance is needed on assessing and incorporating social impacts into investment strategies.
Ambiguous “Do No Significant Harm” Test: The ACCA seeks clarification that short-term financial performance should not overshadow long-term non-financial performance and societal risks.
Furthermore, the ACCA encourages the EC to leverage its pioneering role in sustainable finance.
Joe Fitzsimons, Regional Lead Policy and Insights, EEMA & UK, ACCA, commented, “EC was a first mover in establishing SFDR to combat greenwashing and is now looking to address undue burdens by simplifying and streamlining the requirements. We encourage the EC to use this first mover advantage and revisions process as an opportunity to influence wider global regulations.”
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