According to the European Commission, the transition to a low-carbon, resource-efficient and circular economy are of crucial importance for ensuring the long-term competitiveness of the EU economy. In this context, the Sustainable Finance Disclosure Regulation (SFDR) sets out sustainability-related disclosure requirements that concern Financial Market Participants and Financial Market Advisers.
The regulatory requirements focus on the transparency of:
- The integration of Sustainability Risks
- The consideration of the Principal Adverse Impacts on Sustainability factors
- Dedicated ESG strategies applicable at product level
The first set of requirements went into effect on 10 March 2021. This is generally referred to as Level 1 of the SFDR. Additional information on impact reporting, and details on content, methodologies and presentation have been provided on 22 October 2021 through the Regulatory Technical Standards (RTS), which are generally referred to as Level 2 of the SFDR. The date of application of the Level 2 of the SFDR is foreseen for January 2023.
To better understand the Level 1 and Level 2 SFDR requirements, we have created the SFDR Decision Trees. The Decision Trees outline each step of the specific disclosure obligations that need to be applied. These steps are divided into two levels of application: Entity and Product level.
