Sustainable Finance Disclosure Regulation (SFRG)
The Sustainable Finance Disclosure Regulation (SFDR) is an EU regulation that will apply to financial services providers in the European Union from the beginning of 2021. The SFDR is intended to promote sustainability reporting and transparency within organizations by requiring compliance with certain standards relating to the disclosure of information on sustainable investing and financing. The SFDR requires financial service providers to disclose detailed information about their operations and sustainability strategies. This information includes, among other things, details about sustainable investment products and strategies, information about how sustainable investments are incorporated into the investment process, and the financial services provider's responsibility to promote the sustainability of its products and services.
The SFDR includes disclosure of a company's sustainable investment policy (e.g., statements about sustainability criteria, investment practices, and the performance of sustainable financial products), a classification of financial products according to their sustainable nature, and information about the sustainable features, costs, and risks of the financial products.
In addition, the SFDR requires financial intermediaries and asset managers to provide their clients with more information about the sustainability of their financial products. This includes better disclosure of how sustainable investment products are incorporated into investment processes, as well as an explanation of how the sustainability of the investment portfolio is measured and reported. In doing so, the SFDR helps increase transparency and understanding of sustainable financial products and services and provides investors and consumers with more information about the environmental, social, and governance aspects of the financial products they purchase.