EU Sustainable Finance Disclosure Regulation (SFDR)


  • The SFDR became applicable on 10 March 2021.
  • It sets specific rules for how and what sustainability-related information financial advisors need to disclose.
  • The origins of SFDR lie in work undertaken by the EU’s High-Level Expert Group (HLEG) on sustainable finance from 2016 to 2018.
  • The HLEG produced a roadmap for the EU to pursue two goals:

        1. Integrate sustainability considerations into the financial system

        2. Steer the flow of capital towards sustainable investments.

  • SFDR is one of the core pillars of the Sustainable Finance Action Plan.


  • To avoid greenwashing of financial products and advice by providing greater sustainability-related information.
  • To provide transparency to ensure investors can make the correct investment choices in line with their sustainability goals.

Firm-level disclosures

  • Information on a firm’s website about its policies on the integration of sustainability risks in its investment decision‐making process.
  • Information on a firm’s website regarding the consideration of principal adverse impacts of its investment decisions on sustainability factors.
  • Information in a firm’s remuneration policies and on its website as to how its remuneration policies are consistent with the integration of sustainability risks.

Product-level disclosures

  • All products, including those that do not promote any ESG factors, must be accompanied with a pre-contractual disclosure that sets out the manner in which sustainability risks are integrated into investment decisions, and the likely impact of sustainability risks on the returns of the product.
  • Firms with more than 500 employees must additionally disclose how the financial product considers principal adverse impacts on the sustainability of the product. Additionally, for smaller firms that have opted out, an explanation of the reasons why they do not consider the adverse impacts of investment decisions on sustainability factors.

Implications for the investment management industry

  • Financial advisers are required to publish on their websites information about their policies on integrating sustainability risks in their investment recommendations.
  • Financial advisers are now required to include in their remuneration policies information on how those policies are consistent with the integration of sustainability risks and publish this information on their websites.