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EC publishes long-awaited answers to ESA questions with Q&As SFDR

The European Commission has published answers to questions posed by the European Supervisory Authorities (ESAs) on September 9, 2022, on the interpretation and application of the Sustainable Finance Disclosure Regulation (SFDR). Some changes were made from previously provided responses for a consistent understanding of the SFDR. These are changes to the Q&As of July 6, 2021, and May 13, 2022.


The Q&As cover the following topics:

  • Definition and application of 'sustainable investment';

  • Meaning of "taking into account" the principal adverse impacts at the product level;

  • Definition of Article 9(3) products aimed at reducing carbon emissions;

  • Frequency of disclosure of periodic reports for asset management services;

  • Definition of "employee" for mandatory compliance (comply principle) of the principal adverse impacts for a company with more than 500 employees;

  • Among other things, the Q&As clarify what "sustainable investment" means.

The European Commission has confirmed that Article 2(17) SFDR does not set minimum requirements for what constitutes a contribution to environmental or social objectives or "not seriously impairing. Financial market participants must conduct their assessment and disclose their underlying assumptions for each investment. This policy choice gives financial market participants greater responsibility to investors and means that they must exercise caution in measuring the key parameters of a "sustainable investment".


For example, financial market participants must disclose how they have determined the contribution of investments to environmental or social objectives, how investments do not seriously compromise other environmental or social objectives, and how invested companies follow good governance practices.

The changes made by the European Commission in previous Q&As mainly concern clarifying the criteria associated with Article 9 products and applying Articles 5 and 6 of the Taxonomy Regulation, also in view of related data collection issues.

Financial market participants must publish their first report by June 30, 2023. European Commissioner Mairead McGuinness emphasized that "the SFDR is the first regulation to establish rules on how financial market participants should disclose sustainability-related information."


"The application of the SFDR requirements poses challenges to the industry and regulators, and these questions and answers are intended to guide to facilitate the correct application of the rules. At the same time, we will continue our comprehensive review of the SFDR, focusing on legal certainty, increased usability and mitigation of greenwashing. A public consultation is planned for the fall," McGuinness said.

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