Sustainable Finance Disclosure Regulation comes into effect today, improving the quantity and quality of information about sustainable investments

The Sustainable Finance Disclosure Regulation (SFDR), a cornerstone of the European Commission’s Action Plan on Sustainable Finance, comes into effect today, 10 March 2021. The Regulation aims to trigger changes in behavioural patterns in the financial sector, discouraging greenwashing, and promoting responsible and sustainable investments. The SFDR will set common EU rules on: i) how financial product manufacturers and financial advisers should inform end-investors about sustainability risks, ii) how the impact of investments on the environment and society should be disclosed, and iii) how financial products that are marketed as sustainability-related actually meet that ambition. This enhanced transparency will increase awareness of financial products’ sustainability credentials. While there is growing recognition of the importance of sustainability and awareness of climate-related risks and opportunities, the type of information provided to investors in the financial sector has been limited up until now, and requirements have often differed across Member States. First proposed by the Commission in May 2018, these new rules will strengthen and improve how sustainability related information is disclosed in the financial sector. These rules are part of the EU’s efforts under the Sustainable Development Agenda and Carbon Neutrality Agenda, as well as its commitment to the Paris agreement, to ensure that the financial sector throws its full weight behind the fight against climate change. The Regulation will be accompanied by Regulatory Technical Standards (RTS), which are being jointly developed by the European Supervisory Authorities, and which will be applicable at a later stage.