The SFDR (Sustainable Finance Disclosure Regulation), in force since March 10, 2021, is a regulation that requires all financial entities in the Eurozone to classify their investment products according to ESG criteria. Its aim is to improve transparency in sustainability matters within the European financial sector. Each fund must be assigned to one of the following three categories:
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Article 6: products that do not integrate ESG criteria or are declared “non-sustainable.”
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Article 8: funds that promote environmental or social characteristics, without having a specific sustainable objective.
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Article 9: products whose main purpose is to generate a clearly measurable sustainable impact.
In Spain, the CNMV (National Securities Market Commission) oversees compliance. It can sanction entities that fail to provide the required information on sustainability risks, ESG policies, social or environmental objectives, and measurement methodologies in brochures, websites, and periodic reports.
This article provides a comprehensive overview of the SFDR—from its objectives to its scope and the three main categories—so that asset managers, investors, and regulators can understand why this regulation is essential.
Main Objectives of the SFDR
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Standardize ESG Disclosure
Before the SFDR, each entity used its own criteria and non-comparable reports. This regulation unifies disclosure standards so that investors and regulators can easily compare financial products. -
Facilitate Investor Decision-Making
The SFDR clearly distinguishes between products with no ESG considerations (Art. 6), products that promote good practices (Art. 8), and products with a defined sustainable objective (Art. 9). -
Encourage the Integration of Sustainability Risks
The regulation requires asset managers to assess ESG risks (climate change, biodiversity loss, human rights) for each investment. This promotes a shift where managers not only seek financial returns but also integrate potential social and environmental risks into their analysis. -
Improve Accountability
By requiring periodic and, in some cases, audited information, the SFDR helps ensure that financial entities are held accountable for their ESG commitments, reducing “greenwashing.”
Scope of application
The SFDR applies to all financial entities established in the European Union that market investment products, regardless of the investor’s country of residence. This includes managers of collective investment undertakings (UCITS and AIFs), insurance companies offering financial products, investment advisors, and pension plan providers. Any firm distributing funds, pension plans, structured products, or investment strategies with an ESG component must comply with the disclosure requirements set out in Regulation (EU) 2019/2088.
As for the products covered, the SFDR applies to both traditional vehicles and alternative ones such as private equity funds, real estate funds, or specific fixed income and equity strategies. These include:
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Investment funds (UCITS and AIFs): entities that manage collective portfolios of securities.
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Pension plans and occupational pension funds: both mandatory and voluntary.
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Unit-linked and life insurance products with an investment component: insurance products whose value depends on financial assets.
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Structured products and alternative funds: any instrument that provides exposure to a set of assets.
The CNMV oversees compliance with the SFDR by verifying the classification of each product (Article 6, 8, or 9) in brochures and on websites, as well as the annual publication of the corresponding ESG or impact indicators.
Product Classification under the SFDR
To classify each product based on its sustainability commitment, the SFDR defines three levels:
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Article 6 “Without sustainability objectives”: this category includes funds or instruments that do not incorporate sustainability features or are even considered “non-sustainable.” These products are only required to disclose general financial risks in their documentation, without the need to provide additional information on environmental, social, or governance aspects.
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Article 8 “Promote environmental or social characteristics”: this category includes funds that, in addition to seeking financial returns, apply filters or best practices related to environmental and social issues. In these cases, the fund’s prospectus must describe the ESG policy; the asset manager must also publish on its website the specific Principal Adverse Impact (PAI) indicators it uses, and report annually on their performance.
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Article 9 “Explicit sustainability objectives”: this category includes products whose primary goal is to generate a clearly measurable sustainable impact. These funds, sometimes known as “dark green” or impact funds, must state this purpose in their pre-contractual documents and detail the methodology used to measure it, including KPIs, data sources, and whether external audits are involved. Throughout the fiscal year, they must also periodically report on the progress of their impact indicators and describe key projects demonstrating that progress.
Complying with the SFDR: From Obligation to Strategic Value
The SFDR establishes a unique framework in the EU to classify products based on their sustainability. It requires clear disclosure of ESG-related information. By mandating product classification under Articles 6, 8, or 9, it facilitates fund comparison and provides investors with clear criteria for selection. It also obliges asset managers to integrate ESG risks into their analysis and to report periodically, thereby reducing “greenwashing.”
At Ineria Management, we turn SFDR compliance into an asset: we develop reports for Articles 8 and 9 that are rigorous and clearly communicate your commitments. Our ESG reporting advisory provides concise deliverables aligned with your regulatory and sustainability objectives, integrating the process into your operations to ensure it is continuous, replicable, and adds real value.
