European Commission
The Sustainable Finance Disclosure Regulation (SFDR) is a key part of the EU's Sustainable Finance agenda, aiming to enhance transparency and comparability of sustainability-related disclosures in the financial sector. It requires financial market participants and advisers to disclose their consideration of sustainability risks and the potential adverse impacts of their investments. The regulation applies to various financial products and introduces product categorizations. The SFDR is closely linked with the EU Taxonomy Regulation, forming a comprehensive framework to promote sustainable investments aligned with the EU's climate and environmental objectives.
The Sustainable Finance Disclosure Regulation (SFDR) is a key part of the EU's Sustainable Finance agenda, aimed at improving transparency and comparability of sustainability-related disclosures in the financial services sector[1][2][5].
Key points about the SFDR:
- Requires financial market participants and financial advisers to disclose how they consider sustainability risks in their investment decision-making process and the potential adverse impacts of their investments on the environment and society[1][2][6].
- Applies to a wide range of financial products, including UCITS, AIFs, separately-managed portfolios, and financial advice provided within the EU[1][7].
- Introduces product categorizations based on the degree of sustainability focus: Article 6 (no specific sustainability focus), Article 8 (promotes environmental/social characteristics), and Article 9 (has sustainable investment as its objective)[5][7].
- Disclosures are required at both the entity and product level, via websites, pre-contractual documents, and periodic reports[1][6]. The first set of disclosures (Level 1) came into effect in March 2021, with more detailed requirements (Level 2) applicable from January 2023[6][7].
- Aims to combat greenwashing by mandating greater transparency around ESG claims and enabling investors to better compare the sustainability profiles of different investment products[2][5].
The SFDR is closely linked with the EU Taxonomy Regulation which establishes criteria for determining environmentally sustainable economic activities[3][7]. Together, they form a comprehensive regulatory framework to reorient capital flows towards sustainable investments in line with the EU's climate and environmental objectives[1][5].
Citations: [1] https://finance.ec.europa.eu/sustainable-finance/disclosures/sustainability-related-disclosure-financial-services-sector_en [2] https://www.eurosif.org/policies/sfdr/ [3] https://finance.ec.europa.eu/regulation-and-supervision/financial-services-legislation/implementing-and-delegated-acts/sustainable-finance-disclosures-regulation_en [4] https://www.anthesisgroup.com/regulations-hub/sustainable-finance-disclosure-regulation/ [5] https://esgtree.com/a-brief-guide-to-sfdr-reporting-and-compliance/ [6] https://kpmg.com/ie/en/home/insights/2021/03/what-is-the-sfdr-sustainable-futures.html [7] https://am.jpmorgan.com/fi/en/asset-management/institutional/investment-strategies/sustainable-investing/understanding-SFDR/ [8] https://www.securities-services.societegenerale.com/de/insights/views/news/sfdr-taxonomy-regulation-green-finance/