EU ESG Compliance For Asset Managers
SFDR: What It Is and Whether It Applies to You
The Sustainable Finance Disclosure Regulation, or SFDR, is a European Union rule that requires certain financial market participants and financial advisers to disclose sustainability-related information to investors. The European Commission describes SFDR as a framework for how financial market participants and advisers communicate sustainability information to investors. The regulation is designed to improve transparency around how sustainability risks are considered in investment decision-making and financial products.
SFDR generally applies to financial market participants and financial advisers operating in the EU, including many asset managers, investment firms, insurance-based investment product providers, pension-related entities, and advisers. For U.S. professionals, SFDR may matter if the firm operates in Europe, manages EU-facing products, advises EU clients, supports an EU affiliate, or provides information to investors, lenders, or business partners subject to EU sustainability disclosure rules. Even when a U.S. company is not directly subject to SFDR, financial professionals may still receive sustainability information requests as part of due diligence, investment review, procurement, lending, or fund reporting.