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Sustainable Finance Disclosure Regulation - Article 6 funds

What to consider when integrating sustainability risk into the investment decision making process?

The European Commission published the Sustainable Finance Disclosure
Regulation, known as the SFDR or the Disclosure Regulation in November
2019 with an implementation date of 10 March 2021. Since then financial
market participants, including fund managers and their products
i.e. UCITS and Alternative Investment Funds (“AIFs”), have been assessing
these requirements. On 20 October 2020, the European Commission
confirmed in a letter to the European Supervisory Authorities (“ESAs”) that all
level 1 requirements of SFDR will become applicable from the 10 March 2021 but the level 2 technical standards will not become applicable until 1 January 2022. Fund managers will be required to comply with the high level and principle based requirements of SFDR from 10 March 2021.

This has given fund managers and their funds time to consider the sustainability indicators and how they will integrate and measure sustainability risk in their investment decisions. To date most funds have been considering the website disclosures and the information to be included in pre-contractual disclosures under Article 3 and 6 of SFDR.

In the absence of regulatory guidance for firms to assess how to comply with SFDR, we have produced this paper as the first in a series of publications with a view to assisting funds and their managers in considering the underlying policies that they would need to have in place. This paper focuses on Article 6 of the SFDR.

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