(Wednesday 28th May) New research by ShareAction reveals that while some of Europe’s largest asset managers are making credible progress in their sustainability disclosures, many still fall short of providing instructive information on how they manage the negative environmental and social impacts of their investments.

The research assesses how 30 leading asset managers based in or operating within the EU disclose their engagement and due diligence practices under the EU’s Sustainable Finance Disclosure Regulation (SFDR)—which is up for review by the European Commission later this year.

Despite some encouraging signs and examples of good practice, SFDR disclosures remain patchy and inconsistent. Many asset managers provide only vague explanations about how they act on the negative impacts of their investments on people and the planet, and how they engage with companies that are falling behind.

This lack of clarity leaves end investors and consumers in the dark, undermining SFDR's core goal: to equip them with the information they need to make decisions that support the transition to a sustainable economy.

Isabella Ritter, Senior EU Policy Officer at ShareAction, said:

"The SFDR was meant to lift the lid on how financial actors manage the sustainability impacts of their investments. While some asset managers are leading the way with strong disclosure practice, too many still rely on general language and fail to explain which harms they’re addressing or what they do when companies they invest in don’t improve.

"Our findings show that credible, clear disclosures are possible – but they are still far from the norm. The framework must empower end investors and consumers to spot greenwashing, identify truly sustainable products, and direct their money towards supporting the EU's green and social goals."

Ritter continued: “Too often, asset managers make sustainability claims without showing how they plan to deliver on them. That’s why we focused on engagement disclosures—to examine which concrete actions they take with investee companies to address the negative impacts of their investments. If a product is marketed as sustainable, it should walk the talk. For this reason, engagement should become a core part of the SFDR’s future categorisation system."

As the European Commission prepares to review the SFDR framework, ShareAction urges EU policymakers to seize this opportunity to enhance the regulation so that it can fully meet its objectives. The current drive for simplification should not come at the expense of ambition and prevent the SFDR framework from progressing to its next stage. Rather, it is an opportunity to streamline and clarify disclosures to ensure they meet the needs of end investors.

Based on our findings and current market practices, our recommendations include:

• Maintaining and clarifying entity-level disclosure rules to ensure financial actors clearly report how they identify and act on environmental and social harms across their entire portfolios.

• Requiring engagement disclosures across all new product categories to guarantee that financial products are backed by credible engagement strategies.

• Making engagement mandatory in a transition product category, ensuring that financial product participants utilise their leverage with investee companies to advance their transition and achieve product objectives.

If done right, the SFDR can help close the sustainable investment gap by providing end investors with the data they need to channel capital away from harmful business and hold financial actors accountable for their impact on people and planet.

Notes to the editor:

Key findings:

• Just over half (17) of the asset managers provide detailed explanations on how they engage with companies they invest in to reduce negative impacts—also known as Principal Adverse Impacts (PAIs) - at the firm (entity) level. But many still fail to spell out which harms they focus on or what action they take if companies don’t improve.

• Disclosures at the individual product level are also inconsistent. While some asset managers are transparent about the negative impacts that the products they are offering can cause and how they try to address them, many provide vague or incomplete data.

• However, when looking at what asset managers disclose outside of the SFDR framework, the report shows that they hold the necessary data and can provide clear disclosures, demonstrating what is possible. For example, the majority published detailed policies and data on how they engage with companies and their approach when they don't make progress.