(Bloomberg) -- The European Union is considering extensive changes to its ESG investing framework in response to criticism from asset managers and national regulators.

In a public consultation launched on Thursday, the European Commission will seek to find out how the Sustainable Finance Disclosure Regulation is working in practice, including costs to the financial market. The Commission will also ask market participants whether they think SFDR is succeeding in channeling capital toward sustainable activities.

“Sustainability information is key to empowering investors to make informed decisions on their investments,” Mairead McGuinness, the EU’s commissioner for financial markets and services, said in a statement. “We want to know if our rules meet their needs and expectations, and if it is fit for purpose.”

The scope of the consultation, which runs until Dec. 15, underscores the wide-ranging concerns that financial markets have had since SFDR went into force in March 2021. The EU had intended the rulebook to become the global standard for investing according to environmental, social and good governance standards.

But over the past two years, SFDR’s implementation has been plagued by criticism, including the EU’s failure to adequately define what it means by a sustainable investment. The EU Commission and regulators have had to provide regular updates to SFDR to guide market participants.

The EU Commission said its consultation will seek to establish whether SFDR’s original goal of using transparent disclosures to help the EU shift to a sustainable, climate neutral economy is “still relevant.” Respondents will also get a chance to say whether SFDR has changed how they invest, including the extent to which they take negative impacts into account.

At the same time, the EU is exploring whether to rework requirements guiding disclosures, with a possible shift to focus on investment strategies. That would mark a departure from the current framework, in which funds are divided into three categories with steeper reporting requirements for products that promote or target ESG objectives (known as Article 8 and 9 funds.)

“The SFDR was designed as a disclosure regime, but is being used as a labeling scheme,” the EU Commission said in the consultation. That suggests “that there might be a demand for establishing sustainability product categories.”

--With assistance from Lyubov Pronina.

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