How does the SEC's proposed ESG disclosure compare to EU's SFDR?

It is also insightful when we compare the SEC’s ESG disclosure requirements to the EU Sustainable Finance regulations. The EU SFDR applies to financial advisers and “financial market participants”, which covers a broader market when compared to the SEC, which doesn’t cover private equity, private credit, venture capital, and other AIFs. The SEC’s ESG Disclosures proposal seems easier to implement than the EU’s SFDR because it only asks for a summary and details of the approach used after the fact. In contrast, the EU’s SFDR is more prescriptive and gives technical screening criteria to classify and align funds.

Within the proposed SEC and EU SFDR disclosure requirements themselves, certain disclosures have some similarity, such as the requirement to discuss the degree to which any ESG impact was achieved by investment products with such objectives. However, the approach is different.

The EU SFDR uses a lot more metrics and gives more detailed rules about what can be considered “sustainable” in general than what the SEC’s proposed rules do.

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