EU diverges from UK on stewardship disclosures

January 3rd, 2023

European regulations could deviate from UK rules on stewardship disclosures following responses to a consultation on the EU’s Sustainable Finance Disclosure Regulation (SFDR).

Asset manager DWS called for greater disclosures on the “quality and quantity” of stewardship engagement in its response to the consultation, Responsible Investor reports.

The German firm also said funds seeking to qualify for the proposed ‘transition’ label should be subject to minimum stewardship standards and reporting.

This would sharply contrast with the requirements set out in the UK’s Sustainability Disclosure Requirements (SDR), which were finalised in November. The SDR rules for qualifying for a transition or sustainability label were relaxed by the Financial Conduct Authority (FCA) following a consultation process, which was launched in October 2022.

The EU consultation was open from 14 September 2023 to 22 December 2023 to allow stakeholders to present their views on the SFDR. This includes how it has been implemented and any potential shortcomings, such as in its interaction with other sustainable finance legislation.

It received 63 responses, including from EU citizens, companies and businesses, NGOs and consumer organisations.

Similarly, in France the rules for funds operating under its “socially responsible” ISR label are set to be tightened. Funds using the label will be prohibited from investing in companies involved in new hydrocarbon exploration, production or refining projects from the start of 2025.

The new French regulation is expected to substantial divestments from fossil fuel holdings by pan-European funds, potentially amounting to billions of euros throughout 2024, Funds Europe reports.

The regulations were introduced by French Finance Minister Bruno Le Maire, with the aim of transforming the portfolios of French ESG funds.