Sustainable Finance Disclosure Regulations

Sustainable Finance Disclosure Regulation (SFDR) is part of new European regulation for financial services markets participants. It aims to provide more transparency on sustainability in financial markets and comparability in this regard between different funds.

Environment, Social and Governance (ESG) are three key factors when measuring the sustainability and ethical impact of companies and businesses that Royal London Ireland funds invest in.

Who does it apply to?

The SFDR will require certain firms like insurance companies to comply with new rules on disclosure regarding sustainable investments and sustainability risks.

What does it aim to do?

The SFDR aims to increase the transparency with which affected financial market companies and financial advisers integrate sustainability risks in their investment decisions and investment or insurance advice and products.

The SFDR requires investment products sold in the EU to be categorised as one of the following:

• Article 9 Funds: Funds that have sustainable investment as their objective.
• Article 8 Funds: Funds that promote environmental or social characteristics.
• Article 6 Funds: Funds that do not purport to promote any kind of ESG objective.

These categories are decided based on the extent to which ESG or sustainability characteristics are integrated.