EU Sustainable Finance Disclosure Regulation (SFDR)

I am a fund manager, what exactly am I required to do?

  • publish a general policy on the integration of sustainability risks in investment decisions/advice,
  • clarify the alignment of your remuneration policy with identified sustainability risks, and
  • explain the due diligence policies regarding Principal Adverse Impacts on Sustainability (PAIS) in terms of investment decisions.
  • Explain how your strategy is ‘sustainable’, and compare it to similarly ‘non-sustainable’ investment products.
  • Outline which environmental characteristics the financial product promotes, or which environmental objectives it aims to achieve. This also includes an analysis of the sustainability alignment of this financial product with the EU Taxonomy Regulation.

Some key definitions which can help you understand the requirements:

  • Sustainability Risks [art. 2(2)] → ESG events that could have a negative impact on the value of the investment.
  • Sustainability Factors [art. 2(24)] → impact of the investments on the real world: E, S & employee matters, respect of HR, anti-corruption/bribery matters. This thus refers to the Principal Adverse Impact Indicators.
  • Sustainable Investment [art. 2(17)] → investment in an economic activity that contributes to an E or S objective provided that it does not significantly harm any of those objectives and that the investee companies follow good G practices.
  • Double materiality: sustainability risks impacting the portfolio + impact of the portfolio on sustainability indicators.

What’s next?



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store