Sustainable Finance Disclosure Regulation (SFDR)

It applies to asset managers, insurers, pension providers and advisers selling in the EU. Firms publish policies on sustainability risk, explain how pay and decisions reflect it, and report on principal adverse impacts, meaning the main negative effects of investments on matters such as emissions, biodiversity and human rights. Funds are put into categories according to their claims: those that promote environmental or social characteristics, and those with sustainable investment as their objective, along with the rest. Disclosures appear before sale, on websites and in periodic reports, with set templates. The regime has been criticised for categories that investors read as quality labels, and reforms have been proposed. Supervisors use the filings to challenge a fund that calls itself sustainable without evidence to support the label.

Marketing a global equity fund as promoting environmental characteristics, a management company states in the pre-contract document what the characteristics are, how they are measured and what share of holdings meet them. It also publishes figures on indicators such as carbon intensity and checks they match the fund's marketing.