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April 4, 2024

SFDR Articles 6, 8, and 9 explained

As ESG considerations continue to shape investment decisions, regulatory frameworks like the EU’s Sustainable Finance Disclosure Regulation (SFDR) have emerged to standardise reporting practices and enhance the integrity of ESG investing strategies. Here we explain the SFDR Articles in more detail.

Article 6

This article relates to financial market participants, including investment firms and asset managers. It requires these entities to disclose how sustainability risks are integrated into their investment decision-making processes. This emphasises the importance of considering ESG factors when assessing the risks and opportunities associated with investments.

Article 8 (Light green funds)

Article 8 focuses on the promotion of environmental or social characteristics in investment strategies. Funds falling under this category must disclose their sustainability objectives and how they align with specific environmental or social goals. Investors can then identify funds that prioritise sustainability without necessarily adhering to strict ESG criteria.

Article 9 (Dark green funds)

Article 9 targets funds with a sustainable investment objective. These funds must demonstrate a clear commitment to sustainable investment goals, with their primary objective being to achieve a measurable positive impact on the environment or society. Such funds are expected to undergo rigorous assessment and reporting processes to ensure alignment with their stated sustainability objectives.

Articles 6, 8, and 9 facilitate the categorisation of investment products based on their sustainability objectives. This has enabled investors to make more informed decisions that align with their values and preferences, whether they prioritise risk mitigation, environmental stewardship or societal impact.

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