A central pillar of the European Union’s Sustainable Finance Action Plan is the Sustainable Finance Disclosure Regulation (SFDR), which applied from March 2021.
The SFDR requires asset managers to make sustainability related disclosures with respect to the financial products and services they offer. The broader suite of sustainable finance regulations aims to direct private capital into sustainable economic activities, reduce the risk of greenwashing and align the economy with the objectives of the Paris Agreement and the United Nations’ Sustainable Development Goals (SDGs).
SFDR requires asset managers to make disclosures at a product level and firm level. Financial products, including managed accounts, can fall into three categories under SFDR which determine the sustainability related disclosures to be made for such products.
An overview of product classifications
Although a disclosure regime, not a labelling regime, the regulation effectively establishes three product classifications, based on whether the disclosure obligations set out in Articles 6, 8, or 9 apply. We summarise these below.
- Not subject to Articles 8 or 9.
- Still consider environmental, social and governance (ESG) risks and opportunities.
- Promote environmental and/or social characteristics through binding investment criteria.
- May also be referred to as Light Green Products.
- Have sustainable investment or a reduction in carbon emissions as their objective.
- May also be referred to as Dark Green Products.
Firm level disclosures
Asset managers in scope for SFDR must also make firm level disclosures about how they consider sustainability risks in their investment decision making process, how their remuneration policy is aligned with such an approach to sustainability risk management and whether they consider the ‘principal adverse impacts’ of their investment decisions on sustainability factors. Our Principal Adverse Sustainability Impacts statement and sustainability risk disclosures can be found here.
Implementing SFDR at Macquarie Asset Management
Macquarie Asset Management (MAM) is committed to responsible investment, as demonstrated by becoming a signatory to the United Nations’ Principles for Responsible Investment (PRI). MAM has been a signatory to the PRI since 2015. The public markets businesses of Macquarie Asset Management’s are committed to incorporating the principles into its investment activities.
The public markets businesses of Macquarie Asset Management have several European entities within the scope of the regulation, all of which were fully compliant by the 10 March 2021 deadline.
We invest in sustainability today for a better tomorrow
We seek to invest sustainably because we believe it leads to better long term outcomes fro our clients, investee companies and the communities they serve. By supporting businesses to reduce their greenhouse gas emissions and transition to a low-carbon economy, we believe our efforts can help to preserve and create value, while delivering positive outcomes for communities and the environment.