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Energy Efficiency

IEMA Foundation Certificate in Environmental Management

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Global/EU-SFDR
Sustainable Finance Disclosure Regulation

The EU Sustainable Finance Disclosure Regulation (SFDR) is a set of EU rules that aim to make the sustainability profile of funds and financial products more transparent and comparable for end investors.

EU

EU SFDR
Key features

  • Applies to financial market participants like asset managers, pension providers, insurance companies, investment advisors, etc.
  • Requires disclosures on the integration of sustainability risks, consideration of adverse impacts, and sustainability objectives promoted.
  • Product disclosures include how environmental, social, governance (ESG) factors are considered in investment decisions and stewardship policies.
  • Stricter disclosure standards for products marketed as sustainable investments or promoting ESG characteristics.
  • Standardised disclosure templates provided for pre-contractual and website disclosures.
  • Aims to prevent 'greenwashing' and help investors understand sustainability aspects of investments.
  • Phased implementation began in March 2021, with most rules applicable by 2022.
  • Overseen by European regulators like ESMA - penalties can be imposed for non-compliance.
  • Covers financial products made available in the EU, though primarily impacts EU-based firms.
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Increased transparency

SFDR increases transparency on sustainability factors and risks for the massive EU financial sector to support sustainable growth. It is a precursor to wider EU sustainable finance regulations.

  • Asset managers: This includes firms managing investment funds like mutual funds and exchange-traded funds (ETFs).
  • Institutional investors: This includes pension funds, insurance companies, and other entities managing large investment portfolios.
  • Credit institutions: This includes banks and other financial institutions offering credit and lending services.
  • Investment firms: This includes entities providing investment advice and brokerage services.
  • Venture capital funds and alternative investment funds: These include funds investing in private companies and other alternative assets.