SFDR Reporting: What Article 2 (17) is and Why You Should Care About it

Regulatory Compliance October 20, 2022

From 2023, financial institutions need to report on sustainability under SFDR while confusion around key concepts remains

As we enter the final stretch of 2022, financial market participants are getting ready for their Sustainable Finance Disclosure Regulation (SFDR) reporting starting January 2023. That’s when the final Regulatory Technical Standards (RTS) come into force, with financial institutions required to report on the sustainability of their products using 2022 as the reference period. 

The reporting period was already delayed six months to allow for more time to prepare, but the same challenges to comply remain. It’s common knowledge that the lack of ESG data in the market is one of the main obstacles hindering compliance, but perhaps the larger problem is that many players under the SFDR scope are still wondering what the regulation means by “sustainable investment.”

What is Article 2 (17) of SFDR?

Article 2 sets the foundation of the regulation by providing basic definitions to navigate SFDR, for example, who are the financial market participants and what is a financial product. What is sustainable investment is answered under article 2 (17).

As it is written, the regulation leaves scope for market participants to determine their own criteria for what sustainable investment means. 

So, what actually is a sustainable investment?

Clarity AI’s approach to classifying sustainable investments captures investor and market concepts and translates them into tangible results within the criteria defined in Article 2 (17) of the SFDR. With a transparent, data-driven approach, financial market participants can assess the sustainability of their portfolios and funds, according to the regulation.

We have developed a clear, systematic, and scientific approach to defining a sustainable investment that combines multiple regulatory frameworks with market-leading coverage, with data for more than 50,000 companies and 300,000+ funds. We run each company through a series of Contribution to the Solution, Do No Significant Harm and Good Governance tests to provide a comprehensive universe of sustainable investment companies.

Comparative results for Article 2.17 Sustainable Investments within global market indices using Clarity AI’s data and methodology

Utilize our classifications to build, market, analyze or invest knowing that the securities and funds you are looking at are truly sustainable.

Save time and gain confidence in your sustainable investments. Need proof? See how your funds compare to market benchmarks on sustainable investment. 

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