Given the rapid rise in the volume of impact and sustainable products being launched by asset managers, regulators are starting to impose guidelines and regulative reform to ensure appropriate marketing and classification of investment strategies.

The most prominent regulatory reform is the EU Sustainable Finance Disclosure Regulation (SFDR) – a set of rules which aim to make the sustainability profile of funds more comparable and better understood. The reform focuses on defined metrics for assessing the environmental, social and governance (ESG) outcomes of the investment process and as the name suggests, much more emphasis will be placed on disclosure, including new rules that must identify any harmful impact made by the investee companies.

This regulatory framework forms part of the EU’s wider Sustainable Finance Framework which is backed by a broad set of new and enhanced regulations that will apply across the 27-nation bloc. The SFDR goes hand in hand with the Sustainable Finance Action Plan which aims to promote sustainable investment across the EU, and a new EU Taxonomy to create a level playing field across the whole EU.

SFDR applies across asset classes – read more here.