SFDR (Sustainable Finance Disclosure Regulation)

The Sustainable Finance Disclosure Regulation (SFDR) is an EU regulation that aims to improve transparency on sustainability in financial markets. It requires financial market participants and advisers, such as fund managers, insurers, and investment firms, to disclose how they integrate sustainability risks and consider adverse sustainability impacts in their investment decisions and financial products. The SFDR classifies funds into three categories - Article 6 (no sustainability focus), Article 8 (promoting environmental/social characteristics), and Article 9 (sustainable investment objective). Disclosure requirements apply at both entity and product level, covering aspects like sustainability risk policies, principal adverse impact assessments, and alignment with the EU Taxonomy. The SFDR is closely linked with the CSRD, as the CSRD's expanded sustainability reporting directly feeds into the data needs of financial market participants under the SFDR.