What is SFDR?

SFDR stands for Sustainable Finance Disclosure Regulation, a set of regulations adopted by the European Union in 2019 to promote sustainability in the financial sector. The SFDR requires financial market participants, including investment managers, to disclose how they integrate environmental, social, and governance (ESG) factors into their investment decisions and how they assess the impact of their investments on sustainability.

The SFDR applies to a wide range of financial products, including investment funds, pension schemes, and insurance products. It includes three levels of disclosure requirements, known as Articles 6, 8, and 9, which determine the extent of disclosure and reporting required depending on the degree to which the financial product is considered sustainable.

The SFDR aims to increase transparency and accountability in the financial industry and to encourage more sustainable investment decisions. It is part of the EU’s broader strategy for sustainable finance, which includes a range of initiatives aimed at promoting sustainable investments and transitioning to a more sustainable economy.

What is Article 9 fund criteria?

SFDR establishes two categories of funds: those that promote environmental or social characteristics (“Article 8” funds), and those that have a sustainable investment objective (“Article 9” funds). Article 9 funds must have a clear objective to invest in projects that have a positive impact on the environment or society and must consider sustainability factors in their investment decisions.

To qualify as an Article 9 fund, investors must disclose their sustainable investment objectives, and provide information on how environmental, social, and governance (ESG) factors are integrated into their investment decisions.

What is Article 9 sustainable investment objective?

The sustainable investment objective of Article 9 funds requires that their investment decisions are based on ESG considerations. This means that Article 9 funds must prioritize sustainable investments that contribute to environmental and social objectives, and ensure that these investments meet high ESG standards.

Some actors use the NEC metric (among other metrics) to measure the positive environmental contribution and to define a sustainable investment. For example SWEN Capital Partners and Sycomore Asset Management use a NEC score of +10% or higher as a selection criterion for each component of the funds concerned (discover case studies in the “3. Demonstrate compliance and achieve certification”)

What is the difference between SFDR Article 8 and Article 9?

SFDR Article 8 funds promote environmental or social characteristics, while Article 9 funds have a clear objective to invest in sustainable projects. Article 8 funds may include investments that do not necessarily contribute to sustainable objectives, but have an ESG focus. Article 9 funds, on the other hand, must prioritize investments that contribute to environmental and social objectives and meet high ESG standards.

Do Article 9 funds have to be taxonomy aligned?

While Article 9 funds are not required to be taxonomy-aligned, they must disclose whether and how they use the EU taxonomy in their investment decisions. The EU taxonomy is a classification system that identifies environmentally sustainable economic activities, and is designed to help investors identify sustainable investments that contribute to environmental objectives.

Using the EU taxonomy can help Article 9 funds to demonstrate the sustainability of their investments and to provide transparency to investors. However, the taxonomy is still in development, and it may not cover all sustainable activities or align with the fund’s investment objectives. SWEN Capital Partners also uses the EU taxonomy to measure the level of contribution to an environmental objective.

The need to clarify the definitions

Despite the potential benefits of Article 9, there is still a need to clarify the definitions and requirements of sustainable investments. For example, there is a lack of consensus on what constitutes a sustainable investment or what ESG criteria should be used to evaluate the sustainability of investments. This lack of clarity only multiplies greenwashing attacks from the media and NGOs, such as the great investigation conducted by a dozen European media (including Le Monde and the investigative platform: Follow the Money) entitled: “The great green investment investigation”.

The future of the SFDR article 9

Article 9 of the SFDR represents a significant step forward in promoting sustainable investment and reducing “greenwashing” in the financial industry. However, compliance with Article 9 requirements can be complex and time-consuming, and failure to do so can result in reputational and regulatory risks. Nevertheless, the growing demand for sustainable investment products and the need to address climate change and other sustainability challenges make it increasingly important for investors to consider sustainability factors in their investment decisions.

As the EU continues to develop its sustainable finance framework, we can expect to see more guidance and clarification on the definitions and requirements of sustainable investments. In the meantime, investors and fund managers can take steps to ensure they understand and comply with the requirements of Article 9, and communicate clearly with investors on their sustainable investment strategies.


Overall, Article 9 of the SFDR represents a positive development for sustainable finance, providing a framework for promoting sustainable investment and increasing transparency in the financial sector. By prioritizing sustainable investments that contribute to environmental and social objectives, investors can help to drive positive change and contribute to a more sustainable future.

Written by Sophie Barnabé