It was a nice Christmas present: the list of comments on the revision of the Disclosure Regulation totals 324. The deadline for submissions was 22 December, and associations, companies, and private individuals have put plenty of ideas on paper for improving the so-called SFDR regulation.

Since March 2021, there have been disclosure requirements in connection with sustainable financial products. The regulation should create more transparency, especially about how investment funds deal with ESG and sustainability. To this end, Article 8 funds (which fulfil sustainability criteria) and Article 9 funds (which pursue sustainability objectives) were defined – often referred to as light green or dark green products.

However, instead of providing more clarity, this part of the sustainability regulation created confusion and a great deal of uncertainty among suppliers and customers. EU Commissioner Mairead McGuinness, therefore, wanted a comprehensive assessment of these regulations in order to eliminate any shortcomings. The aim is to review legal certainty, the applicability of the regulation and the fight against greenwashing.

As important as the review of this part of ESG regulation is, there is little hope that it will be much improved. There is only agreement that something needs to change. But opinions differ as to how. Many companies and associations want to dispense with the classification under Article 8 and Article 9 altogether. Others say that the European legislators and regulators have already invested so many resources and so much work in this type of presentation that one should stick with it.

The Disclosure Regulation is like many parts of the overflowing ESG regulation from Brussels: It is like a green kraken that is spreading further and further. It regulates too much and in too much detail and leaves too little to the parties involved. You can't regulate all the ramifications of sustainability with guidelines. That would be a green planned economy. The latest proposal for categorising ESG products now comes from the UK, which has broken away from the EU and introduced a different classification system. There, products are categorised as "Focus", "Improver", and "Impact". This labelling describes some investment strategies, but will not solve the problem of comparability and confusion.

The issue of disclosure for financial products is just one area that will be tackled this year in terms of ESG regulation. A second area is the finalisation of the ESG rating regulation within the EU, which is intended to regulate a wide range of green rating issues and create greater comparability, uniformity and reliability.

One aim of the ESG rating rules is also to break the dominance of US rating agencies in the sustainability segment. How well this can be achieved with regulation can be seen in credit ratings, where little has changed in terms of the dominance of S&P, Moody's and Fitch.

The green regulation roadmap continues with the idea of regulating the names of funds that invest according to ESG and sustainability. This will also be great fun for the industry, as there will be plenty of disputes about thresholds and boundaries. It is undoubtedly right to prevent trickery such as greenwashing. However, the question is whether the conventional instruments of competition law are not sufficient.

ESG should use 2024 to take a breather. There are many regulatory building blocks on the table. It is a matter of evaluation and prioritisation and not of creating even more regulation. The chances for that are in favor. Simply because there are European elections in June, and little happens from April to December.