The Sustainable Finance Disclosure Regulation was introduced by the EU in March 2021 to improve transparency in sustainable investment products and prevent greenwashing. Coming into effect on 1st January 2023, the directive provides specific definitions for sustainability risks and principal adverse impacts. Sustainability risks refer to environmental, social or governance events, such as climate change, which could cause an actual or a potential material negative impact on the value.
The SFDR requires asset managers to provide prescriptive and standardised disclosures on how ESG factors are integrated at both an entity and a product level.
