AFM Sets New Standards for Sustainable Finance & ESG Compliance

Key Takeaways

• Sustainability Claims: Ensure sustainability claims are clear, accurate, and backed by evidence. Misleading claims, especially regarding pensions, can have long-term consequences.
• SFDR Compliance: Provide clear, accessible, and reliable sustainability information for easier product comparison. SFDR templates should be used to offer investors transparency and insight.
• Product Oversight & Governance (POG): Embed sustainability into your product strategy and governance policies. Ensure sustainable products are accurately represented and monitor distribution to avoid mismatches with consumer preferences.
• Suitability Assessments: Gather detailed information on clients’ sustainability preferences and offer products that genuinely align with their goals. Avoid steering customers toward products that don’t match their values.

Deep Dive

The Dutch Authority for the Financial Markets (AFM) kicked off May 2025 with an important update on their priorities for sustainable finance. As consumers increasingly demand financial products that align with their values, the AFM has issued guidance on how financial institutions can meet this new wave of demand. But while progress has been made, the AFM is urging financial firms to do even more, and they’re not holding back on their expectations.

While progress has been made, there’s still work to do. Financial institutions need to get serious about compliance with regulations that have been in place for some time. The AFM has identified four key areas of focus for its supervision over the next two years: sustainability claims, the Sustainable Finance Disclosure Regulation (SFDR), Product Oversight & Governance (POG), and suitability assessments. Here's a closer look at what the AFM expects, and why these updates matter.

If you’re offering a sustainable product, you need to back it up. Consumers—whether retail investors or pension participants—are relying on financial institutions to provide clear, accurate, and trustworthy information about sustainability. The AFM’s update stresses that while strides have been made, more effort is required across the board to meet established regulations and avoid falling short. Financial institutions must be transparent, responsible, and most importantly, match what they say with what they deliver.

With that in mind, let’s break down the key themes from the AFM’s ESG update and explore what financial institutions need to do to meet these expectations:

1. Sustainability Claims: Be Real, Be Transparent, Be Balanced - Marketing sustainability is all the rage these days, but here's the catch: claims need to be real. If a product is billed as sustainable, it must actually be sustainable—and firms need to prove it. The AFM makes it clear: sustainability claims should be clear, correct, and non-misleading, especially in the context of pensions, where misleading claims could have long-term impacts on people’s financial futures. What does this mean for financial firms? If you’re making a sustainability claim, make sure it’s substantiated and backed by evidence. Don’t exaggerate, don’t mislead—just tell the truth. And when in doubt, leave the claim out.

2. SFDR: Giving Investors the Information They Deserve - The Sustainable Finance Disclosure Regulation (SFDR) is all about transparency. The AFM emphasizes that while many firms are using SFDR templates, the quality of the information published still leaves room for improvement. If we want consumers to make informed decisions, they need accurate, easy-to-understand, and comparable data about the sustainability of the products they’re considering. For financial firms, this means making sure that all required SFDR information is easily accessible and reliable. Investors should be able to compare products at a glance, understand the risks, and see exactly how a product measures up on sustainability criteria. If your sustainability information is buried or unclear, the AFM won’t be happy—and neither will your customers.

3. POG: Putting Sustainability at the Heart of Product Strategy - The AFM is pushing for sustainability to be more than just a buzzword in financial products. It’s time to embed sustainability into the very core of Product Oversight & Governance (POG) policies. Financial firms are expected to ensure that sustainability characteristics are part of their product evaluation process and that products marketed as sustainable actually meet those expectations. This is not just about meeting regulatory standards; it’s about aligning with consumers who are actively seeking sustainable investment options. For firms, that means taking a hard look at your product range, ensuring it’s genuinely sustainable, and that your customer journey, from website to sales, is designed with sustainability in mind. If you’re not monitoring where your products are going and who’s buying them, you might be doing your customers (and your business) a disservice.

4. Suitability: Matching Clients with What They Actually Want - Finally, we have suitability assessments, a critical part of the AFM’s expectations. Financial firms must gather comprehensive information about their clients’ sustainability preferences and ensure that the products offered match those preferences. It's not about pushing customers into products that sound good on paper but don’t align with their values. Firms need to dig deeper, understand their clients’ goals, and provide the right products that match their sustainability vision. In short, it’s about offering solutions that truly fit, not just what’s available in your product lineup. The AFM expects firms to listen carefully to customers and avoid steering them toward products that aren’t aligned with their preferences.

The AFM has made it clear that while progress has been made, there’s still much to be done. Over the next two years, they will continue to monitor how financial firms implement these changes and encourage a higher standard of sustainability reporting and product offering. If you’re behind, the AFM will notice, and they’ll take action. But if you’re leading the charge, the AFM wants to see you keep pushing the envelope.

So, If you want to stay compliant and meet the growing consumer demand for sustainable finance, you need to be transparent, accurate, and in tune with your customers. It’s not just about checking boxes, it's about building trust and ensuring that your products genuinely live up to their promises.

The next update from the AFM is scheduled for the fall, so stay tuned for more insights and continue refining your approach to sustainable finance. Because, in the end, sustainability isn't just a trend, it’s the future of finance.

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