Key takeaways
Datia’s team has had many inspiring conversations with funds who identify themselves as “Article 6” (of the SFDR), but are keen to understand what it takes to make the leap and proudly call themselves “Article 8” or even “Article 9”.
If you are new to sustainable investing and are wrapping your head around SFDR (short for Sustainable Finance Disclosure Regulation), hang in there. In this blog post, we will share some basic knowledge about what the Financial Industry means by “Article 6, 8, and 9” and give you an overview of changes needed in order to become an “Article 8” or “Article 9”.
What does Articles 6, 8, and 9 mean?
The Sustainable Finance Disclosure Regulation (SFDR) sets disclosure requirements for the Financial Market Participant (FMPs). The goal of these requirements is to make sure there is reliable data and transparency to back any claims of sustainable investment.
Note that the requirements are different, depending on how each fund labels itself. Your fund might follow under one of the three classifications described by three of the articles in the regulation - namely, Articles 6, 8, and 9.
For simplicity, FMPs started calling themselves Article 6, 8, or 9 to quickly describe their sustainability investment policies, in light of the SFDR requirements:
- “Article 6” describes what needs to be disclosed by funds that have no sustainability focus.
- “Article 8” describes what needs to be disclosed by funds that promote environmental and/or social sustainability. These funds have been nicknamed “light green”.
- “Article 9” describes what needs to be disclosed by funds that have the clear sustainability objective of impacting ESG and the majority of the portfolio is made of ESG-related investments. These funds have been nicknamed “dark green”.
And why would your fund go through the trouble of becoming an Article 8 or 9 fund?
It is expected that the SFDR will represent one step towards increasing the inflow of capital to a more sustainable economy. More specifically, there is hope that the new European regulation will incentivize investors to allocate their capital towards investments that take into consideration not only financial returns but also sustainable goals.
For example, in Sweden, where Datia is headquartered, Article 8 or 9 funds have been experiencing an inflow of investment, in spite of the turbulence in the investment market. We believe this trend is here to stay. And if your fund wants to be part of this change, you might be wondering what steps to take.
What are some of the tasks to keep in mind if your fund wants to take the leap toward becoming an Article 8 or 9 fund?
From following some of our clients’ first-hand experience with this process, we know that gearing up to take sustainability metrics into account is not without its challenges.
- First, your fund needs to add valuable resources to the team. Mainly specialists who can understand and interpret the guidelines from the European regulation and translate them into actual reports
- Then, your fund needs to start collecting data about their investee companies in order to start measuring your positions against ESG-related metrics
- Gaining access to benchmark funds is also important, after all, establishing comparisons will help you evaluate your investments’ sustainability results
- Your fund needs to streamline this process because screening your portfolio and reporting on ESG metrics will become just another part of the day-to-day work
How Datia can help
Our platform is built to generate SFDR's PAI statements and to assess sustainable investments under SFDR within one click. Finally, Datia makes sure all the sustainability data needed is collected across multiple asset classes, including stocks, bonds, mutual funds, and more.
The PAI statement, but also the European ESG Template (EET), and the EU Taxonomy report are constantly updated following closely the latest EU guidelines.
Reach out to our team of experts to understand how Datia can help you with SFDR compliance.
