SFDR’s Article 6, Article 8, and Article 9 refer to different levels of sustainability disclosure under the Sustainable Finance Disclosure Regulation (SFDR). Understanding the distinctions between them is crucial for investment companies transitioning to more sustainable investment practices.
In short, here’s the overview of what Articles 6, 8, and 9 require:
- Article 6: Transparency of the integration of sustainability risks (in case of funds that do not promote nor have sustainability as an objective).
- Article 8: Transparency of the promotion of environmental or social characteristics in pre-contractual disclosures (in case of funds that promote environmental or social characteristics - sometimes referred to as “light green”)
- Article 9: Transparency of sustainable investments in pre-contractual disclosures (in case of funds that have sustainable investment as their objective - sometimes referred to as “dark green”)
There are multiple benefits of aligning your disclosures with Article 8 or 9:
- The SFDR encourages capital flow towards sustainable investments, aiming to align financial returns with sustainable goals.
- Funds following Article 8 and 9 requirements have witnessed increased investments in regions like Sweden, indicating a growing trend towards sustainable finance.
- Funds following Article 9 requirements were the only ones with a positive net flow of capital in Q2 and Q3 2022, according to Morningstar
- According to the Financial Times, “ESG products” received 65% of the capital flows into European exchange-traded funds (ETFs), versus 51% in 2021
- ESG UCITs, on average, outperformed non-ESG equivalents in net terms (22.8% vs. 16.8%) in 2021, according to ESMA’s “Costs and Performance of EU Retail Investment Products 2023” report
Atlant Fonder’s Deputy Managing Director Peter Beckman estimates that about 80% of the meetings with clients and distributors touch upon topics related to sustainability.
“Sustainable finance disclosure is a must-have, not a nice to have. Your products have to be at least Article 8 to qualify for big platforms and big fund distribution in Sweden.” – Peter Beckman
As you can see, there are many reasons to go through the trouble of following Article 8 requirements. But how exactly do you get there?
Download our checklist to get an overview of the changes needed to get started in the journey of committing to Article 8.
