SFDR explained
Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (SFDR).
The SFDR establishes new sustainability-related transparency requirements for financial institutions at the level of the legal entity and at the level of their financial products (within the meaning of the SFDR).
SFDR publications
- Introduction
- Information about BGL BNP Paribas policy on the integration of sustainability risks in investment decision-making process and insurance advice
- Information about BGL BNP Paribas policy as financial market participant on considering the principal adverse impacts on sustainability factors in investment advice, portfolio management activities and Insurance advice
- Information about the integration of sustainability risks into remuneration policies of BGL BNP Paribas
- DPM mandates financial product classification
- Statement on principal adverse impacts of investment decisions on sustainability factors
Overview of financial instruments
- Investor's Guide
- Information on financial products, promoting environmental or social characteristics (Article 8 SFDR) and with a minimum proportion of financial instruments qualified as sustainable investment
- Information on financial products promoting environmental or social characteristics (Art. 8 SFDR)
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What are the aims of the SFDR?
The aims of the regulation are:
- To enhance the protection of end investors
- To improve the disclosure of information intended for them.
Financial market participants (for portfolio management) and financial advisers (for investment advance and insurance advice) must provide the necessary information on sustainability for end investors to be able to make fully informed investment decisions.
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How does the regulation enhance investor protection?
In the absence of harmonised rules on transparency, it had been difficult for end investors to properly compare different financial products in terms of their environmental, social and governance risks, and of their sustainable investment objectives.
To enhance the comparability of financial institutions and their financial products, the SFDR requires the disclosure of harmonised information for end investors.
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What are the new sustainability-related transparency requirements on financial institutions at the level of the legal entity?
Each legal entity subject to the SFDR is required to publish on its website:
- Information on how sustainability risks are considered in the investment decision-making process, investment advice, and insurance advice;
- Information on how sustainability risks are considered in remuneration policies;
- Information on the consideration of principal adverse impacts on sustainability in their investment decisions and recommendations.
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What are the new sustainability-related transparency requirements on financial institutions at the level of their financial products (within the meaning of the SFDR)?
At the level of the financial products (within the meaning of the SFDR), financial institutions must adapt their pre-contractual disclosures and the content of their website to clarify how sustainability risks and principal adverse impacts on sustainability factors are considered in each decision to invest in a product, even if it is not a sustainable product.
There are additional requirements for two types of product:
- Products that promote environmental or social characteristics (Article 8 products)
- Product with a sustainable investment objective (Article 9 products).
These two product categories are subject to additional pre-contractual disclosure requirements (to explain how their ESG criteria or sustainable investment objective are attained), and to periodic reporting requirements. This information must be published on a website.
Lastly, SFDR financial products are subject to disclosure requirements under the EU Taxonomy regulation.