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 Principals Adverse Impacts on Sustainability factors
- Dedicated ESG strategy applicable at product level
The first set of requirements went into effect on the 10th of 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 will be provided through the Regulatory Technical Standards (RTS) which are generally referred to as Level 2 of the SFDR (Level 2). The final Level 2 will be published during 2021, and the date of application is foreseen for the beginning of 2022.
To better understand the Level 1 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.