Current Developments in Sustainable Finance


The SFDR regulation has been in force for 2.5 years, and the delegated regulation under it has been applied since the beginning of 2023. Best practices and open questions continue to spark discussion, but there has also been a lot of learning and progress made.

Recently, our members have been particularly concerned about gathering and utilizing the data required under the SFDR’s delegated regulation for investment activities. Access to sustainability data has significantly improved and will further ease with the gradual implementation of the Corporate Sustainability Reporting Directive (CSRD) starting next year. However, it is crucial to learn how to use and assess the significance of this data for investment activities. It’s worth noting that the impact of the CSRD extends to small target companies through supply chains, and implementing the regulation requires work and consideration even for companies not directly within its scope.

From SFDR Article 6 to Article 8 – What’s Changing?

We’ve also received inquiries from our members who are establishing their first SFDR Article 8-compliant funds. It’s been encouraging to see the private equity sector continually taking steps toward sustainability and supporting target companies on their sustainability journeys.

Here’s a brief summary of what are the changes when transitioning from SFDR Article 6, the so-called ‘basic fund,’ to managing a fund promoting environmental or social characteristics under Article 8:

  • Company-level information on managing sustainability risks and adverse sustainability impacts, as per SFDR Articles 3 to 5, remains unchanged and should be available for all financial market participants, regardless of the SFDR disclosure regime of the funds they offer.
  • Before entering into an agreement, the Article 8 fund must provide the customer with information in accordance with Annex II of delegated regulation 2022/1288 under SFDR.
  • Typically, a law firm specializing in fund documentation can assist in preparing the form, but because the provided information relates to the investment strategy, the fund manager’s input is necessary.
  • For Article 8 funds, a periodic disclosure must be provided to customers as part of the annual report, using the format specified in Annex IV of delegated regulation 2022/1288, outlining progress toward achieving the promoted sustainability objectives.
  • To ensure reporting to the fund’s investors, it is necessary to secure the availability of requested information when making investments in target companies, for example, through term sheet conditions. Additionally, due diligence must verify the company’s suitability for the declared investment strategy, including from an ESG perspective.
  • Additional informal quarterly or other reporting may be provided to the limited partners, but it does not replace the legally required formal reporting.
  • The fund’s ESG strategy and disclosure regime can be changed in accordance with the conditions for changing the investment strategy as described in the fund agreement. It is unclear whether customers have the right to, for example, redeem their assets if the fund changes from an Article 8-compliant fund to an Article 6-compliant one.

Despite ongoing legal uncertainties and interpretational challenges, according to the latest data from Morningstar[1], assets in SFDR Article 8 and 9 compliant funds exceeded 5 trillion euros for the first time in Q2 2023.

It is clear, that funds with various sustainability objectives remain popular, and fund managers should prepare to enhance their sustainability features and strategies while considering the constraints set by regulations. Additionally, it is essential to anticipate a continuously changing legal landscape with new regulations on the horizon.

[1] Morningstar, SFDR Article 8 and Article 9 Funds: Q2 2023 in Review, available at

More information:

Suvi Collin, Head of Legal & ESG
050 560 3532