Sustainable Finance

Elevate your SFDR readiness by embedding the following considerations into both entity-wide policies and individual product lifecycles. Maintain rigorous documentation, transparent metrics and a governance backbone to turn regulatory compliance into a strategic advantage.

Under SFDR, "sustainable investments" must demonstrate environmental or social objectives with clear, measurable outcomes. A common pitfall is relying on self-certifications by investee companies, for instance, without granular, documented evidence - such as third-party impact reports or KPIs - to substantiate claims and meet Article 8 and Article 9 requirements.

Top Tip

Ensure that due diligence processes, including ESG due diligence questionnaires, are sufficiently comprehensive and are appropriately applied for each prospective investment.

Terms such as “ESG-aligned” or “impact-oriented” without quantifiable benchmarks expose firms to the risk of anti-greenwashing regulatory actions.

Top Tip

Draft precise product-level disclosures with clear thresholds (e.g., minimum percentage of green revenues, CO₂ reduction targets) and ensure ongoing monitoring to support marketing claims. Never make an ESG-related claim that cannot be substantiated.

Financial institutions often struggle with disparate ESG data sources, giving rise to risks of disclosure/reporting errors.

Top Tip

Build or integrate a centralized data platform that maps each investment to, as applicable, Taxonomy Regulation criteria, principal adverse impact indicators and other relevant metrics.

Sustainable finance demands robust governance. A lack of clear internal roles (e.g. product-governance committee and senior individual with "SFDR ownership") and escalation procedures for non-compliance issues can delay corrective actions and invite regulatory scrutiny/action.

Top Tip

Establish a documented governance framework with defined responsibilities, review cycles and board-level reporting.