Sustainability Finance Disclosure Regulation (SFDR)
The Sustainability Finance Disclosure Regulation (SFDR) is a European Union regulatory framework that requires financial market participants and financial advisors to disclose information related to the integration of sustainability factors in their investment decision-making processes and the consideration of adverse sustainability impacts of their investment decisions. The SFDR aims to promote transparency and consistency in sustainable finance across the EU financial market and ensure that investors and clients can access reliable information to make informed investment decisions. The SFDR distinguishes between two categories of financial products: those that promote environmental or social characteristics (known as Article 8 products) and those with a sustainable investment objective (known as Article 9 products). Financial market participants are required to disclose information on the environmental or social characteristics of Article 8 products and provide detailed information on the sustainability objectives and the methodologies used for Article 9 products. The SFDR aims to facilitate the transition to a more sustainable financial system by improving transparency, accountability, and comparability of ESG-related information provided by financial market participants and advisors. It helps investors and clients to assess the sustainability risks and impacts of their investments. In addition, it promotes the integration of sustainability factors in investment decision-making processes, ultimately contributing to the advancement of sustainable finance across the EU.