Whitepaper
9.12.2022
5.2.2024

Navigating the EU SFDR regulation - The ultimate guide for fund managers and companies

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WHITEPAPER

Navigating the EU SFDR regulation - The ultimate guide for fund managers and companies

The original legislation for the Sustainable Finance Disclosure Regulation (SFDR) first drawn up in 2019 has become the EU’s flagship legislation for its drive towards enhanced transparency in sustainable investing and applies to all Financial Market Participants marketing their products to EU based investors. Crucially, it is the first time that fund managers have been required to submit detailed, quantitative data on behalf of their portfolio companies, signifying a critical turning point in sustainability disclosures across the Private Equity sector. The aim of this legislation is three-fold:

  1. To improve transparency surrounding sustainability claims made by financial market participants (FMPs)
  2. To eliminate greenwashing
  3. To improve transparency of sustainable investment products in the European Financial Sector.

SFDR may be the first regulation to require this level of information, but it certainly won’t be the last. Further regulations will follow suit, including frameworks that apply outside of the EU, including TCFD in the UK and SEC in the US, as well as other upcoming European regulatory frameworks such as CSRD. These detailed disclosures will increase the regulatory burden on fund managers and portfolio companies alike as well as raising questions on the ‘what, how and when’ in terms of how to prepare and respond effectively.

Reassuringly, market calls for increased collaboration between regulators to reduce the burden of multiple disclosure regulations have been answered. We are now seeing extensive alignment across the requirements of different frameworks. Consequentially, fund managers aligning with SFDR can likely future proof themselves against upcoming regulations.

This Whitepaper equips fund managers with the background ‘know-how’ required to execute next steps, specifically when it comes to liaising with portfolio companies regarding data requirements, a key pain point with SFDR.

KEY ESG provides software that streamlines data submissions from portfolio companies to fund managers to enable successful compliance with SFDR, as well as other frameworks.


*On the 4th of December, the European Supervisor Authorities published a report containing proposed amendments to SFDR’s regulatory technical standards.

The proposals are:

  • Additional disclosures for sustainable investments
  • Introducing new, and specifying existing, PAIs
  • New disclosures on decarbonisation targets
  • Revisions to disclosure templates

The European Commission will now take until March 2024 to decide on the proposals. To find out more, read the report or contact a member of our team. The information in this whitepaper is up to date as of December 2023.

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