Brussels — Managed Funds Association (MFA) encourages the European Commission (EC) to retain the existing framework of the Sustainable Finance Disclosure Regulation (SFDR) rather than fully replace it in a letter submitted today. The letter is in response to the EC’s consultation on potential changes to the SFDR.
In its responses, MFA emphasises that overhauling the SFDR framework would heighten the risk of investor and market confusion. In addition, alternative asset managers have already invested significant time and resources to comply with the current rules, and significant changes would render those efforts obsolete. MFA’s comments also highlight that the SFDR focuses overwhelmingly on sustainability in securities on the long side but overlooks the role of indirect exposures. Accordingly, the responses encourage the EC to adjust SFDR so that it better recognises the role of tools like derivatives and short positions in incentivising companies towards more sustainable business practices.
“We’re encouraged that the Commission is taking the opportunity to refine the SFDR and address current deficiencies,” said Jillien Flores, MFA’s Head of Global Government Affairs. “However, the Commission should avoid wholesale changes as such a regime change would result in investor confusion and deteriorate investor confidence. Also, alternative asset managers have already devoted significant time and resources to implementing the existing framework. One area for improvement is ensuring SFDR better recognises the role of tools like short selling and derivatives in helping accomplish sustainability goals.”
MFA’s responses note that any changes should be targeted amendments within the existing framework and should not result in the creation of an entirely new system. MFA also stressed that–to allow for an orderly transition–any changes should be accompanied by an extended transition period with grandfathering provisions for products that comply with the current framework.
MFA’s full response is available here.
About the Global Alternative Asset Management Industry
The global alternative asset management industry, including hedge funds, credit funds, and crossover funds, has assets under management of $5.5 trillion (Q3 2023). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.
About Managed Funds Association
Managed Funds Association (MFA), based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 170 member firms, including traditional hedge funds, credit funds, and crossover funds, that collectively manage nearly $3 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.