How to SFDR
11.11.2024 – Articles
The Sustainable Finance Disclosure Regulation (SFDR) was designed to integrate ESG into financial markets: preventing greenwashing and allowing investors to easily compare sustainable funds. Implemented in 2021 by the EU Commission, SFDR applies to all funds established in the EU, and or marketing in the EU.
Here we explore the persistent SFDR challenges firms are facing, and how they are best advised to manage them in practice.
Name calling: be careful what you say
Fund names are a powerful marketing tool, with a potential to mislead investors. Following ESMA an update in December 2023, use of ESG and sustainability words in fund names must now be supported with material evidence of sustainability.
In practice, how funds are named can trigger the minimum SFDR requirements their investment strategies are held to. This is the case even when managers haven’t necessarily classified their funds as Article 8 or 9.
Examples of key SFDR requirement triggering words are: