• Andrew Byrne

Guide to responsible and sustainable investment launched by TISA




Now that the Sustainable Finance Disclosure Regulation (SFDR) has come into effect across the EU on March 10th, The Investment and Saving Alliance (TISA) – a cross-industry financial services membership body formerly known as the Tax Incentivised Savings Association - has published a guide on the implications of SFDR. SFDR means that EU (and certain non-EU) fund managers become subject to new sustainability-related rules.


Under the SFDR, fund managers have to report on how they manage sustainability risks, substantiate the environmental, social and governance (ESG) credentials of their products and disclose the principle adverse impact (PAI) their investments have on sustainability. The changes have been introduced to enforce higher standards for funds which declare themselves as “green” and should provide transparency thereby helping to avoid accusations of “greenwashing”.


The SFDR has already been described as the anti-greenwashing regulation and it is anticipated that the requirements will lead to some funds de-emphasising the ESG characteristics which they currently allude to or, where such characteristics are beyond question, funds may double-down on them.


Taken in totality, the changes required by the SFDR are complex but can be summarised as placing the onus on financial institutions to provide evidence of sustainability activities at both entity and product level.

Entity Level disclosure Entities must disclose information on their website regarding their sustainability risk policy, alignment of remuneration policies with their sustainability objectives and the PAI of their investment decisions on sustainability.


Product Level disclosure requires product information related to sustainability for both ESG and non-ESG products. The products have to be classified into one of three categories:

  • Article 6 – funds that do not promote ESG investment characteristics;

  • Article 8 – light green funds which promote environmental or social characteristics and which invest in companies who follow good governance practices;

  • Article 9 – dark green funds or ESG impact funds which have either sustainable investment or reduction in carbon emissions as their objective.

Surprisingly, the UK government chose not to implement the SFDR into its legislation at the end of the Brexit transition period. However, any temptation to ignore the implications will have an impact on the credibility of UK companies doing so and would also have a reductive effect on their ability to operate across financial markets.


In any case, the November 2020 budget made the UK the first country requiring disclosures aligned with the Task Force on Climate-related Financial Disclosures (TCFD) fully mandatory by 2025 – a requirement which goes further than the SFDR “comply or explain” approach.


As a guide to the full complexities and stipulations of SFDR and all other regulations concerning sustainability, TISA’s Responsible and Sustainable Investing Good Practice Guide de-mystifies what is required. It also goes beyond just the legal requirements because as Jeffrey Mushens from TISA says: “Consumers are increasingly conscientious [and] want to know where their money is invested and how ethical and sustainable are the products and services that are offered to them".

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