Where the CSRD* (which we told to you about here) provides a framework for the sustainability reports of non-financial companies, the SFDR applies to investment companies, portfolio managers and banks. These are required to publish information on the sustainability of their financial products and to classify their funds according to various sustainability criteria.
In short, financial products are divided into 3 categories:
For products meeting the criteria set out above, certain information must be included in the company’s annual report:
Today there is talk of imposing ESG criteria for all types of products in order to encourage companies to invest in sustainable finance, to guarantee more transparency and comparability between these companies and not to penalize “good students”.
To achieve these objectives, a consultation launched by the European Commission is underway. You can submit your responses by December 15 (find the targeted consultation here and the public consultation here).
The taxonomy regulation also clarifies the SFDR by allowing, thanks to various environmental indicators, to determine whether an economic activity is a sustainable investment or not.
This European taxonomy (or so-called “green taxonomy”) is also currently being reviewed, we will tell you more about it soon!
Alongside these European developments, in France, the Ministry of the Economy announced on November 7, 2023 that funds investing in companies carrying out new exploration, exploitation or refining projects linked to hydrocarbons will no longer be able to claim the ISR. According to Morningstar, around 45% of the 1,200 labeled funds will therefore have to modify the composition of their portfolios, at the risk of losing their label.
CSRD: Corporate Sustainability Reporting Directive
ISR: “Investissement Socialement Responsable” (or “Socially Responsible Invesment”), French label that aims to reconcile economic performance and social and environmental impact by financing companies that contribute to sustainable development.
PAI: Principal Adverse Impact, defined in the technical norms (RTS) of the SFDR
SFDR: Sustainable Finance Disclosure Regulation