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Sustainable Finance Disclosure Regulation – Article 9 Funds or “Dark Green Funds”

What to consider for Article 9 Funds based on the draft regulatory technical standard issued by the European Supervisory Authorities (“ESAs”) on 4 February 2021?

Article 9 Funds or "Dark Green Funds"


The third part of our Sustainable Finance Disclosure Regulation ("SFDR") series focuses on requirements for Article 9 Funds by providing a scope, market overview, timeline and more for this group of funds under SFDR. We also discuss our view on areas that there is absence of regulatory guidance for firms, with a view to assisting funds and their managers in considering the underlying policies that they would need to have in place.

Previous articles in the series


The second part of our “SFDR” update focused on the key considerations for Article 8 Funds. Some of the key highlights included:

  • Scope – If a Fund considers the principal adverse sustainability impacts (“PASIs”) indicators this does not mean that the Fund is automatically an Article 8 Fund. The Fund Manager must integrate the PASIs indicators into their investment decisions.
  • PASI – The draft regulatory technical standards (“Draft RTS”) addressed some of the feedback from the industry by reducing the number of mandatory PASIs from 32 to 14, that Fund Managers and Funds are expected to monitor and report against. The changes in respect of investments in sovereigns, supranationals and real estate assets are a particularly welcome change, due to the unique nature of these investments. PASI indicators should be assessed quarterly e.g. For 31 December year ends the calculation should be performed in March, June, September and December. This allows for a yearly average to be calculated providing a representative PASI for the reporting period which should be easier for Funds that have significant portfolio turnover. The PASI should be completed for at least the 5 previous reporting periods. There is no requirement to calculate the PASI retrospectively.
  • Disclosures and reporting – The new mandatory templates for pre-contractual and periodic reporting disclosures allow for consistency in reporting across Funds.
  • Assurance over non-financial information – The benefits of assurance improves transparency and credibility of non-financial information, resulting in a higher level of trust from potential investors.

Our first paper in the series gave focus to the implications for Article 6 Funds. Some of the key highlights from our initial paper were:

  • Fund manager and Funds should document their policy on integrating sustainability. The policy should be documented for each Fund, be reviewed and approved by the board of directors of the Fund manager on an annual basis.
  • The sustainability policy should be included on the website and the website disclosure should be a separate section which states whether the Fund manager and Fund considers sustainability risk or not and it should be updated on a regular basis.
  • Sustainability risk is integrated into the existing Risk Management Frameworks demonstrating linkages, dependencies and potential impacts to support decision making.

The areas above should be applicable for all Funds, unless sustainability is deemed to not be relevant for a specific Fund. 

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