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What Does SFDR Mean?

From food and clothing to recreation and travel, our everyday choices have a profound effect on the environment. Now more than ever, the same is true of how we save and invest.

To help investors make better-informed choices, the EU's Sustainable Finance Disclosure Regulation (SFDR), effective since March 2021, established clear sustainability standards and imposed requirements for sustainability-related disclosures at the entity, service, and product levels. 

SFDR is part of a broader set of EU regulations designed to integrate sustainability into financial decision-making and to prevent greenwashing. Since the initial implementation, SFDR has been updated  as part of the EU's broader strategy to align financial flows with the Paris Agreement and the United Nations Sustainable Development Goals (SDGs). By enhancing transparency and comparability, SFDR aims to empower investors to make more informed decisions and to support the transition to a more sustainable economy.

How the New EU Regulation (SFDR) Can Help Investors

It establishes sustainability standards within the financial markets – asset managers are on notice to avoid the greenwashing of financial products.

It imposes new requirements for sustainability-related disclosures for financial institutions at entity, service, and product level.

It provides standardised disclosures to help provide comparability of types of ESG products.

It recognizes sustainability risks and opportunities by categorising products marketed in the EU.

It aims to connect finance to sustainability, e.g by supporting 1.5C scenario, CO2 emissions reduction, gender equity, and social justice.

Classification of Financial Products

The new EU regulation imposes various new sustainability-related disclosures in pre-contractual, periodic and website documentation. The SFDR basically classifies financial products into three categories:

Article 6

Products that consider sustainability risks in their ESG integration approach.

Article 8

Products that have an ESG integration approach and, in addition, have binding environmental and/or social characteristics in their process.

Article 9

Products that have an ESG integration approach, have binding environmental and/or social characteristics, and a clear sustainable investment objective.

Our Commitment and Expertise

We have a long track record of considering ESG factors alongside the traditional financial measurements to help identify those investments that have the potential to deliver sustainable returns.

Read more about our commitment to sustainable investing here.

Our Specialist Investment Managers embrace ESG incorporation as it best fits their investment process and enables us to offer a full complement of responsible investing strategies to our clients.

To find out more about our Specialist Investment Managers’ ESG approach, please click here.

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