ESA Joint Committee · sfdr-48 Final

Can a financial product “promote” carbon emissions reduction as an “environmental characteristic”, as opposed to having it as an “objective”? In other words, can a financial product disclose carbon em

Regulation
SFDR
Answered
2023-04-06
Answer provided by
European Commission
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Joint Committee Q&As are published in consolidated PDF documents without explicit question/answer delimiters. Section boundaries below are identified automatically and may occasionally be imprecise.

Question

Can a financial product “promote” carbon emissions reduction as an “environmental characteristic”, as opposed to having it as an “objective”? In other words, can a financial product disclose carbon emissions reduction as an environmental characteristic under Article 8 SFDR, or should any financial product which targets carbon emissions reduction as a feature always be considered to be having “carbon emissions reduction” as an “objective” and therefore be required to disclose the information required by Article 9(3) SFDR? In this example, if the financial product is considered an Article 8 SFDR product, what would be the criteria to differentiate it from an Article 9 SFDR product?

Answer

Article 8 of the SFDR does not limit the types of characteristics that can be promoted by financial products. The SFDR does not prevent a product from promoting carbon emissions reductions as part of its investment strategy if the product does not have sustainable investment as its objective. However, information disclosed in pre-contractual, website and periodic disclosures as regards the carbon emissions reduction characteristics of the product should not mislead investors into thinking that this aspect is part of the product’s objective and therefore that the product has sustainable investment as its objective as per Article 9(3). Moreover, Article 13 SFDR requires that marketing communications do not contradict the content of disclosures made pursuant to the SFDR: this implies that marketing documents should not lead investors into believing that the product pursues sustainable investment, where the promotion of carbon emissions reductions is only a mere characteristic of the product’s investment strategy.
View original on ESA Joint Committee (EBA, ESMA, EIOPA) ↗

This Q&A is published by ESA Joint Committee (EBA, ESMA, EIOPA) and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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