What is the SFDR regulation?

The Sustainable Finance Disclosure Regulation (SFDR) came into effect in March 2021. This new measure, which is part of a sustainable finance approach, has shaken up the world of asset management.  

In this article, we explain everything you need to know about the SFDR and its impact on sustainable finance.  

What is the SFDR?

SFDR stands for Sustainable Finance Disclosure Regulation. It is a European regulation that governs and harmonizes the transparency of financial products in Europe.  

The origins of the SFDR

In force since March 10, 2021, the SFDR is part of the 2015 Paris Agreement framework. Its objective is to bring more social and environmental responsibility into European financial markets.  
The SFDR is part of the European Commission's Action Plan on Financing Sustainable Growth.  

The components of the SFDR

The SFDR covers two new categories of non-financial products: products that promote environmental or social characteristics, and products with a sustainable investment objective.  
The SFDR ensures that these new investment offerings benefit from greater transparency.  

How the SFDR works

The SFDR acts as a standard for European Union countries in the field of sustainable finance. To do this, it sets out regulatory technical standards (RTS) as well as obligations for financial market participants regarding the sustainability of financial products, in other words the risks these products may pose to the environment or society.  

Who is affected by the SFDR

The SFDR affects European financial market participants, in particular financial advisers and portfolio management companies. These players must now disclose the principal adverse impacts (PAI) of the investments they recommend, based on sustainability factors, as well as the risks linked to external events.  

The impact on French financial players

In France, legislation reinforces the SFDR, notably through the loi Énergie Climat (French Energy and Climate Law) and the loi sur la Transition énergétique (French Energy Transition Law), which require product investors to carry out non-financial reporting. The goal, once again, is to improve investment transparency regarding the social and environmental impacts of financial products.  

The impact of the SFDR on sustainable finance

The SFDR ensures greater transparency in European financial investments, as part of a sustainable finance approach. This new regulation therefore brings consistency and a better understanding of marketing documents.  
It makes it easier to compare so-called sustainable products and thus to fight greenwashing in financial investments.  
The SFDR supports sustainability goals through greater transparency on environmental and social impacts. It therefore encourages change among financial players and in the offerings they provide.  

Adopting sustainable finance measures

It is not always easy to start the environmental transition of your company's financing. That is why Leasetic is here to support you! Our experts have more than 30 years of combined experience in finance and help companies bring together two aspects that are everywhere in today's world: finance and eco-responsibility.
Talk to one of our experts now!  

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