Article 9(3) SFDR, carbon emissions reductions and other benchmark questions: From Article 9(3) SFDR and the Commissions Q&A answer regarding that Article in July 2021 (which outlined the principle th

The first subparagraph of Article 9, paragraph (3), is neutral in terms of product design. Financial products that have an objective of reduction in carbon emissions can therefore fall within the scope of Article 9(3) SFDR whether they use a passive or active investment strategy. The SFDR is a transparency regulation, it does not prescribe the use of Paris-Aligned Benchmarks (‘PAB’) or Climate Transition Benchmarks (‘CTB’) nor the use of any other specific type of index. Where no PAB/CTB is passively tracked, the SFDR requires a detailed explanation of how the continued effort of attaining the objective of reducing carbon emissions is ensured in view of achieving the long-term global warming objectives of the Paris Agreement. This is also reflected in Delegated Regulation (EU) 2022/1288 that requires financial market participants to clearly explain the extent to which a financial product complies with the methodological requirements set out in Commission Delegated Regulation (EU) 2020/18189. 9 Commission Delegated Regulation (EU) 2020/1818 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks (OJ L 406, 3.12.2020, p. 17).