The Case for Impact: Enhancing EU’s SFDR Framework

Introducing an impact category in the Sustainable Finance Disclosure Regulation (SFDR) is essential for ensuring the integrity and growth of the impact ecosystem. While the impact investing market is still growing and maturing, it plays a key role in supporting EU policy goals, such as the green, digital and just transitions and the social economy. Impact investors drive innovation by funding solutions to green and social challenges; they support start-ups as they progress through the critical “valley of death” phase towards maturity and scalability. Both Ursula von der Leyen, in her Political Guidelines for the next European Commission (2024-2029), and Mario Draghi, in his report The Future of European Competitiveness, emphasise the importance of enhancing Europe’s competitiveness, fostering innovation — especially among small and medium-sized enterprises (SMEs) and start-ups — and mobilising European private capital to support sustainable economic growth, thereby reducing dependence on foreign financing. Establishing supportive legal frameworks for impact investing will be key to achieving these goals.

Key positions:

• Support Growing Interest in Impact Investing: Interest in impact investing is rapidly increasing among both institutional and retail investors. A dedicated impact reporting category would increase the integrity of impact investments while unlocking further capital.
• Acknowledge the Unified Definition of Impact Investing: European stakeholders have agreed on a clear definition of impact investing, centred on intentionality, impact measurement and management, and financing companies that address social or environmental challenges. This consensus supports the establishment of a distinct impact category, clarifies various ESG
  investing approaches and enhances consumer protection in financial markets.
• Focus on Reporting Positive Impact: Current SFDR reporting categories, such as Article 9, place excessive reporting burdens on impact funds, especially those investing in unlisted SMEs. An impact category would better align reporting with impact claims and measurement practices, alleviating these challenges.
• Call to Action: Impact Europe calls on EU policymakers to establish a distinct and voluntary impact category under the SFDR, aligned with the European market’s definition of impact investing. A differentiation between sustainable and impact investment products, including both private and public market investments, could serve as a solution to safeguard and grow the impact investing market.

This position paper is endorsed by: