Sustainable finance initiatives, including investor disclosure, can play a limited but important role in mitigating the negative impacts of certain economic activities on our environment and society. The Sustainable Finance Disclosure Regulation (SFDR) has carved a new path by requiring ESG disclosure for asset managers. The investor community has developed further awareness around sustainability which is positive. That said, the SFDR has not addressed concerns of greenwashing and may, in some aspects, have worked against this goal. There is room to enhance this legislative framework to better enable investors to develop greater sophistication and investment managers to help finance the real-economy’s transition to net zero. PGIM¹, a leading global asset manager, supports the European Commission’s efforts to seize this important opportunity for the SFDR to unlock its full potential.

In this paper, we explore:

• To label or not to label (that is the question!)
• Disclosure dystopia – how can we simplify?
• The critical components of a successful categorisation regime