The Sustainable Finance Disclosure Regulation

In order for Europe to reach its international environmental commitments and targets, the EU regulatory landscape is undergoing considerable changes.

One of these changes is the entry into force of the Sustainable Finance Disclosure Regulation (SFDR), for which businesses need to start preparing now.

What is the SFDR?

As a key part of the EU’s sustainable development policy agenda, the SFDR is intended to increase transparency on sustainability among financial institutions and market participants. The regulation consists of disclosure requirements on the organisational, service and product levels to standardise sustainability performance, hence preventing “greenwashing” and enabling comparisons for sustainable investment decisions.

Who does the SFDR apply to?

The SFDR mainly applies to financial institutions (banks, insurers, asset managers and investment firms) operating within the EU. Non-EU entities will be affected indirectly through EU subsidiaries, provision of services in the EU and market pressure.

The disclosure requirements are considered at the level of the entity and of the product.

The Sustainable Finance Disclosure Regulation (SFDR)
Requirements to disclose information on their corporate website apply to financial market participants and financial advisers

Entity-level disclosure 

Requirements to disclose information on their corporate website apply to financial market participants and financial advisers, in the context of the proposition of, among others, portfolio management and investment advice services, insurance-based investment products, pension products as well as Alternative Investment Fund and UCITS products: 

  • Sustainability risk policy (integration of sustainability risks into the investment decision-making process)

  • Principal Adverse Sustainability Impact (adverse effects on sustainability of the investment decision and/or in the investment advice)

  • Consistent alignment of the remuneration policies with the sustainability objectives

Product-level disclosure 

Under the SFDR, financial market participants and financial advisers are required to disclose product information related to sustainability for both environmental, social, and governance (ESG)-related products and non-ESG products. The regulation requires entities to classify the products or advice they offer into one of the three following categories: mainstream products, products promoting environmental or social characteristics or products with sustainable investment objectives.

Product-level disclosure requirements affect pre-contractual disclosure (client information, brochure, etc), product website disclosure, and periodic product reports.

Sustainable Finance Disclosure Regulation (SFDR) : Entity-level disclosures vs. Product-level disclosures

Some of these disclosures are also required under the EU Taxonomy Regulation.

The time to prepare for the SFDR is now: PwC can help

The time to prepare for the SFDR is now: PwC can help

With deadlines fast approaching, financial organisations need to prepare now. Our Financial Services specialists can assist by performing SFDR impact and regulatory gap analyses to help you develop and implement the SFDR strategy that’s best suited to your company’s needs.

Have questions or would like to discuss how to best prepare your organisation for the SFDR? Please get in touch.

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Contact us

Marc  Daelman

Marc Daelman

Partner, PwC Belgium

Tel: +32 477 50 00 38

Géraldine D'Argembeau

Géraldine D'Argembeau

Partner Risk & Compliance, PwC Belgium

Tel: +32 476 47 19 59