In addition to the Sustainable Finance Disclosure Regulation (“SFDR”), the long-awaited supporting Regulatory Technical Standards (“RTS”) have been published in the Official Journal of the European Union on 25 July 2022.
These standards are targeted towards the diverse financial market participants and advisors, providing them with detailed guidance on the sustainability and environmental, social and governance (“ESG”) data they are required to disclose. Their impact on other, non-financial market participants will be indirect, yet significant. 


The European Commission’s Action Plan

In 2018 the European Commission launched its action plan to boost sustainable growth in order to achieve a greener Europe with a carbon neutral economy by 2050, thus living up to the Paris Agreement. The aim is to direct not only public funds, but also private capital towards sustainable investments as both are needed to reach these goals. An important step in this process has been the adoption of the SFDR as part of the sustainable finance package.


Sustainable Finance Disclosure Regulation  


The Regulation aims to promote transparency and liability in the realm of sustainability investments. The second main objective is to make it easier for investors to compare competing financial products and services on the level of sustainability, thereby improving investor protection against greenwashing.


The SFDR applies to two main types of entities: financial market participants (such as credit institutions, investment firms, insurers and asset managers) and financial advisors. The entities within the Regulation’s scope are those based in the European Union, as well as those based outside of the EU who are marketing to investors within Europe. Further, the SFDR impacts non-EU entities via EU-based subsidiaries and through market pressure.



The SFDR levels the playing field by standardising the way in which firms disclose and report on sustainability and ESG related risks and impacts. It requires financial actors and advisors to publish reliable, understandable and comparable information on how they consider such matters when making or proposing investments. Disclosure requirements apply both at entity level and at product level.   

Entity level disclosures

When proposing investment services and products, in-scope entities are required to disclose the following information on their website:

  • Their sustainability risk policy, explaining how sustainability risks are integrated into the investment decision-making process;
  • The adverse impacts of the investment decision or the investment advice on sustainability, also referred to as the “Principal Adverse Impacts”; and  
  • How sustainability objectives and risks are reflected and integrated in their remuneration policies.

Product level disclosures

The SFDR instructs in-scope entities to disclose product information related to sustainability for both ESG-related and non ESG-related products. Financial actors and advisors must class the services and products they offer into one of three categories:

  • Mainstream financial products with no ESG characteristics (the so-called “Article 6 Products”);
  • Financial products promoting ESG characteristics (the so-called “Article 8 Products” or “light green products”); and
  • Financial products with sustainable investment objectives (the so-called “Article 9 Products” or “dark green products”).

For each of these categories specific product-level disclosure requirements apply. Such disclosures can be requested in the form of pre-contractual disclosures (e.g., product brochures or prospectuses), product website disclosures and periodic product reports.


Entering into force and RTS

The SFDR, which has been applicable since 10 March 2021, is now accompanied and supplemented by Regulatory Technical Standards (“RTS”). These standards cover the exact content, methodology and presentation of the information to be disclosed under the Regulation, improving the quality and comparability of these data. They include various and detailed requirements for disclosing entities’ impact on environmental, social and governance related indicators. Published on 25 July 2022, they will be applicable from 1 January 2023.

Given the RTS’s fast approaching application date, the necessary information will have to be disclosed for the first time between 1 January 2023 and 30 June 2023, covering the reference period between 1 January 2022 and 31 December 2022.
Consequently, some in-scope entities must start gathering all the relevant information required by the SFDR and its RTS relating to their current operating period in order to comply with these new and detailed disclosure requirements next year.


How this might affect you

With this timeline in mind, the entities under the scope of the SFDR and its RTS should start preparing now. Financial market participants and advisors must collect and analyse requisite information from their investee companies and implement appropriate systems to establish and maintain compliance. If the required information is not readily available, they should make efforts to obtain this information directly from their investee companies.

Therefore, even though the SFDR and its accompanying RTS might not directly apply to de non-financial market participants, indirectly these entities will likely be impacted as well. As the in-scope entities will need more information from the companies they invest in or lend funds to, the latter should prepare themselves to readily supply appropriate and accurate data.

The data in question cover a wide range of indicators, all related to ESG factors. However extensive and detailed, the information requested will mainly relate to specific topics which are material and relevant to a business’ activities.
Examples of topics about which an entity such as a credit institution or asset manager could request further information include, but are not limited to: carbon footprint, water usage and recycling, board gender diversity, workplace accident prevention policies, anti-corruption policies and exposure to controversial weapons.   


How RSM can help you

The time to prepare for making the relevant disclosures under the SFDR and RTS is now. Financial market participants and advisers will start gathering the necessary data to ensure their compliance with the Regulation, approaching their investees and requesting ESG and sustainability related data where needed.

If you would like to discuss how to best prepare for a potential request for information from your investor or if you would like to know more about this topic and how it may impact you, then do not hesitate to get in touch with us.