SFDR - Sustainable Finance Disclosure Regulation · Climate Dictionary

'The Sustainable Finance Disclosure Regulation (SFDR) is a European Union regulation that came into effect on March 10, 2021. It''s part of the EU''s broader action plan on sustainable finance, aiming to reorient capital flows towards sustainable investments.

Mandatory ESG disclosures

SFDR requires financial market participants and advisors to disclose how they integrate environmental, social, and governance (ESG) risks into their investment decisions and advice. This aims to increase transparency and reduce greenwashing in the financial sector.

Principal Adverse Impact (PAI) reporting

Financial institutions must report on the negative impacts their investments have on sustainability factors. This includes metrics related to greenhouse gas emissions, biodiversity loss, water pollution, and social issues.

Product categorization

SFDR introduces a classification system for financial products:

Article 6: Products that do not integrate sustainability into the investment process
Article 8: Products promoting environmental or social characteristics
Article 9: Products with sustainable investment as their objective

References

SFDR - Sustainable Finance Disclosure Regulation — Société Générale Securities Services This is EU Regulation 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability disclosures in the financial services sector (known as the SFDR or Disclosure Regulation).
Sustainability-related disclosure in the financial services sector — European Commission The EU has put in place a transparency framework, the Sustainable Finance Disclosure Regulation (SFDR). By setting out how financial market participants have to disclose sustainability information, it helps those investors who seek to put their money into companies and projects s…
EU Sustainable Finance Disclosure Regulation (“SFDR”) — Actis The EU Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088) sets out sustainability disclosure obligations for financial market participants, financial advisers and financial products (“SFDR”).