Get familiar with the EU regulations

SFDR - What is it?

SFDR gives you as an investor clear information about how sustainable your investment opportunities really are. With simple categories, you can easily compare products, hopefully avoid greenwashing, and ensure that your investments match both your financial goals and personal values.

SFDR Fund Categories: Article 6, 8 and 9

SFDR (Sustainable Finance Disclosure Regulation) is an EU regulation that came into effect in March 2021. The purpose is to:

Increase transparency around sustainability aspects in financial products
Give investors better opportunity to compare products based on sustainability criteria
Prevent "greenwashing" by requiring standardized information
Redirect capital toward more sustainable investments to support the EU's green transition

The regulation is a central part of the EU's action plan for sustainable finance and works together with other regulations such as the EU taxonomy to create a more sustainable financial system.

Article 6 - "Gray" or "Conventional" funds

Definition: Financial products without specific sustainability focus.

Disclosure requirements: - Must describe how sustainability risks are integrated into investment decisions - Must assess the likely impact of sustainability risks on returns - If sustainability risks are not considered relevant, a clear justification must be provided

Investment strategy: - No specific sustainability goals or characteristics - Can invest in all types of assets without ESG restrictions

Transparency: - Must disclose whether and how sustainability risks are integrated - Does not require extensive ESG reporting

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Article 8 - "Light Green" funds

Definition: Funds that promote environmental and/or social characteristics.

Disclosure requirements: - Must disclose how the environmental or social characteristics are met - Must describe how sustainability risks are integrated into investment decisions - Must publish information on sustainability factors in periodic reports

Investment strategy: - Promotes environmental or social characteristics, but does not have sustainable investment as its main objective - Can invest in companies with good governance practices - Must follow certain ESG criteria

Transparency: - Must publish information on websites and in pre-contractual documents - Must describe how they promote environmental or social characteristics

Article 9 - "Dark Green" funds

Definition: Funds with sustainable investment as their main objective.

Disclosure requirements: - Must clearly define the sustainable investment objective - Must describe how the investments do not significantly harm other environmental or social objectives - Must publish detailed information on sustainability goals and results

Investment strategy: - Has specific sustainable investment objectives (e.g., CO2 reduction, social inclusion) - Invests in activities that contribute positively to environmental or social objectives - Must ensure that investments do not significantly harm other sustainability objectives - Must invest in companies with good governance practices

Transparency: - Highest level of ESG disclosures and reporting - Must document how investments contribute to the sustainable objectives - Must measure and report on progress toward the established sustainability goals

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Why SFDR is Important for You as an Investor

As an investor, SFDR (Sustainable Finance Disclosure Regulation) provides you with valuable benefits that strengthen your investment decisions:

Transparency: SFDR ensures that you receive clear information about how your investments impact the environment and society. No more guesswork about how "green" your investments really are.

Comparability: With standardized categories (Article 6, 8, and 9), you can easily compare different investment products across providers and choose the level of sustainability that matches your values.

Protection against greenwashing: SFDR's strict disclosure requirements reduce the risk of financial products appearing more sustainable than they actually are. You can make decisions based on facts rather than marketing.

Risk management: By requiring information about sustainability risks, SFDR helps you identify investments that may be vulnerable to climate change, social conflicts, or poor corporate governance.

Value alignment: SFDR makes it easier to invest in accordance with your personal values and sustainability goals, whether you want to focus on environmental issues, social matters, or both. With SFDR, you as an investor gain better tools to make informed decisions that can not only provide financial returns but also positive effects for the planet and society.

30-06-2021

THE ESG METHODOLOGY

A responsible investment approach for long-term value

Learn all about our processes and means for investing with a sustainable aim – in detail.