The Sustainable Finance Disclosure Regulation (SFDR) aims to improve the clarity and comparability of sustainability disclosures in financial market participants’ investment policies and products. This includes transparency on how they integrate sustainability risks in their decision making, but also disclosing their investments’ potential adverse impacts on the environment and society.

The main purpose of the SFDR framework is to enable investors and consumers to make more informed investment decisions contributing to the sustainable transition, by setting disclosure requirements covering a broad range of environmental, social & governance (ESG) metrics at both entity- and product-level.

SFDR is a fundamental pillar of the EU Sustainable Finance agenda. It was introduced by the European Commission as a core part of its 2018 Sustainable Finance Action Plan alongside the EU Taxonomy and the Low Carbon Benchmarks Regulation.

Its provisions, which were complemented at the technical level via a Delegated Regulation adopted by the European Commission, are fully applicable since 1 January 2023.

ESMA recently published a proposal to update this Delegated Regulation, which is planned to be adopted by the European Commission over the course of 2024 and to apply in January 2025.

In parallel, the European Commission is conducting a comprehensive assessment of the SFDR framework which may lead to a legislative review over the course of 2025.