ESG data are provided by
EU Sustainable Finance Disclosure Regulation (SFDR)
The EU Sustainable Finance Disclosure Regulation (SFDR) is a set of EU rules which aim to make the sustainability profile of funds clearer, and easier for investors to understand and compare. It's an indication whether, according to the EU SFDR, the financial product promotes Environmental or Social Characteristics (Article 8), has Sustainable Investment Objectives (Article 9) or if it does not fit into either category (Not Stated).
SFDR focuses on pre-defined metrics for assessing the environmental, social and governance (ESG) outcomes of the investment process at a fund level and is designed to prevent greenwashing and ensure a systematic, transparent and harmonized approach within financial markets. It is part of the EU’s wider Sustainable Finance Framework which is backed by a broad set of new and enhanced regulations that apply across the EU. The SFDR goes hand in hand with the Sustainable Finance Action Plan which aims to promote sustainable investment across the EU, and a new EU Taxonomy to create a level playing field across the whole EU.
Not Stated
Not stated is applied to those share classes that do not fit into either category (Article 8 or Article 9) as provided by the pre-contractual disclosure document or the periodic disclosure document whichever has the latest effective date. This includes article 6.
Article 6
Article 6 covers funds which do not integrate any kind of sustainability into the investment process and could include stocks currently screened and excluded from investment mandates by ESG funds, such as coal fired power generation, mining, or tobacco companies. While these will be allowed to continue to be sold in the EU, providing a clear labelling system which defines them as non-sustainable may make these funds harder to market when compared against more sustainable funds.
Article 8 - Environmental or Social Characteristics
Article 8 applies where a financial product promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices. Investments may include energy companies with a mix of generation assets, and companies able to show clear progress towards better ESG practices.
Article 9 - Sustainable Investment Objectives
Article 9 covers products targeting sustainable investments and applies where a financial product has sustainable investment as its objective and an index has been designated as a reference benchmark. Investments should have clear ESG benefits as a primary goal, rather than the benefits being incidental to the primary business activity.