3 Key Impact Points:
- SFDR’s Global Reach: The regulation is reshaping how asset managers worldwide disclose sustainability-related information, pushing transparency and reducing greenwashing risks.
- Growing Sustainable Investments: Market data shows a rise in sustainable funds, with Article 8 and 9 funds now representing 47.4% of the market.
- Five Key Actions: KPMG outlines “no-regret” steps for asset managers to stay ahead of SFDR, from building strong policy foundations to enhancing governance and infrastructure.
The Sustainable Finance Disclosure Regulation (SFDR), a key component of the EU’s Action Plan for Sustainable Finance, is driving the transition toward greater transparency and trust in the financial markets. Designed to combat greenwashing and accelerate capital flows into sustainable investments, SFDR is already having a substantial impact on asset managers both within and outside the EU.
In this KPMG report, asset managers share insights on how SFDR is influencing investment strategies, transparency, and sustainability practices across the industry.
“Many PE managers are still trying to determine what ESG metrics make the most sense for their investments. The challenge is to find well-defined metrics that can be monitored and reported. Those with a portfolio of diversified investments will need to take a more holistic approach.” – Glenn Mincey, Global Head of Private Equity at KPMG International
Why SFDR Matters
The SFDR sets clear rules for sustainable investment disclosures, fostering greater transparency and helping asset managers to demonstrate how their funds align with environmental and social goals. With US$5.62 trillion in assets under management linked to either Article 8 or Article 9 funds, the regulation is reshaping sustainable finance. Article 8 funds, which promote environmental or social characteristics, represent 55.5% of market AUM, while Article 9 funds, with sustainability as their core objective, account for 3.5%.
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According to KPMG’s survey of 100 asset managers, 47% reported that SFDR has had a positive impact, particularly by increasing transparency in their reporting.
Five “No-Regret” Actions for Asset Managers
KPMG’s report outlines five strategic actions to help asset managers enhance their SFDR compliance and sustainability efforts:
- Create a Strong Policy Foundation: Implement robust policies, including Investment and Engagement Policies, to ensure SFDR compliance and clear operational guidelines.
- Enhance Data, Systems, and Infrastructure: Asset managers must invest in scalable systems that allow for future regulatory changes and comprehensive ESG data management.
- Strengthen Governance: Establish well-defined governance structures, ensuring clear roles and responsibilities for SFDR implementation across the firm.
- Integrate ESG into Culture: Encourage a firm-wide understanding of the long-term value of ESG, focusing on the impact of sustainability and climate risks on portfolios.
- Stay Ahead of Trends: Proactively monitor regulatory changes, identifying synergies between SFDR, the EU Taxonomy, and other global frameworks to capitalize on emerging opportunities in sustainable finance.
As SFDR continues to evolve, asset managers should remain agile, ensuring their investment strategies and operations are aligned with the growing demands for transparency and sustainable investment practices.
Related Article: UN Global Compact SDG Investment Forum Wraps Up with Debut of Groundbreaking Sustainable Finance Report
