The Asset Management Group (AMG) of SIFMA notes that whilst the aims of SFDR are laudable and it has undoubtedly increased investor focus on sustainability issues, in some areas the framework could be significantly improved. Whilst SFDR disclosures are an improvement in terms of transparency as compared to having no standardised disclosures, they are nevertheless lengthy, complex and difficult for investors (particularly retail investors) to navigate, overly narrow, rigid and create significant compliance costs for the industry (which are ultimately borne by investors).

In addition, SFDR does not provide sufficient flexibility to deal with issues such as data gaps, engagement approaches or transition assets, or takes into account complex investment strategies. For example, reporting templates do not provide space to adequately explain the sustainability-related attributes of complex investment strategies. Data challenges and the risk of inadequate data in SFDR disclosures impact investor confidence and lead to market credibility issues.

SIFMA AMG notes that flexibility in SFDR disclosures is essential to an extent, in order to:

i. appropriately harness the innovation of asset managers and capital markets to solve sustainabilityrelated challenges; and

ii. allow asset owners to allocate more capital towards sustainable investments in a manner that meets their individual preferences.

Furthermore, lack of clarity around core concepts, lack of alignment with other sustainable finance legislation and frequent changes in guidance and legislation have led to confusion, lack of consistency and significant compliance costs. These issues together feed into regional divergences in interpretation of the SFDR framework, and consequently, various enforcement challenges for the national competent authorities.

SIFMA AMG is of the view that SFDR disclosures should be tied to concepts that are clear and for which adequate data exists already and is accessible.

SIFMA AMG notes that even if all the disclosures were to be made machine-readable, not all the financial market participants and distributors have the requisite technology, to extract data from such disclosures and re-use it.