The Sustainable Finance Disclosure Regulation (SFDR) is an EU regulation that aimsto increase transparency in the market for sustainable financial products.
The SFDR has entered into force in 2021. It introduces disclosure requirements for financial market participants both at the product and at the entity level. For example, financial market participants are required to disclose how they take sustainability risks and adverse sustainability impacts into account in their decision-making process.
The SFDR lays out transparency requirements for financial market participants, both at entity and product level, on pre-contractual disclosures, periodic disclosures and disclosures on the firm’s website. As such, the SFDR introduces different requirements based on how sustainability considerations are integrated into the financial product’s objectives.
For example, financial products that promote environmental or social characteristics fall under the scope of SFDR Article 8, while financial products that have sustainable investments as their objective are regulated by SFDR Article 9.
For more information on the relationship between the EU taxonomy and the SFDR, read the dedicated FAQ.