Dark Green


As issued in the context of the EU Commission’s commitment to the Sustainable Development Goals of the UN 2030 Agenda for Sustainable Development, the SFDR regulation represents a major milestone. It introduces unprecedented, harmonized requirements on sustainability-related disclosure regarding financial products, to a multitude of financial market actors and advisors.

The disclosure includes sustainability risks and the consideration of adverse sustainability impacts on a firm’s processes, as well as the provision of sustainability-related information with respect to financial products.

The EMF Microfinance Fund has a sustainable investment objective in accordance with Art. 9 Regulation (EU) 2019/2088 of the European  Parliament and of the Council of 27 November 2019 on sustainability related disclosures in the financial services sector (the “SFDR”).

An article 9 product generally needs to be an investment in economic activity, that contributes to an ESG objective, while simultaneously not undermining any of these objectives and with the target company following good governance practices.

At the heart of the EU’s ESG disclosure regime are two pieces of legislation, the Taxonomy Regulation, and the Sustainable Finance Disclosure Regulation (SFDR). The Taxonomy is a classification system that determines whether an economic activity can be regarded as sustainable and consistent with any of the six environmental objectives, while the SFDR sets out the disclosure requirements for funds, fund groups, and financial advisers.

The data challenge:

SFDR is an excellent step in the right direction to providing clients with comparable ESG information, but it comes with various challenges. Collecting accurate ESG data through a timely and reliable process will initially be complex, as information is not readily available nor is it subject to the same oversight as financial data. Therefore data providers cannot provide accurate SFDR-relevant estimates on alternative assets. Additionally, data collection in emerging countries has its own set of unique challenges. As a result of these challenges, measurement standards for social and governance indicators need further development as many indicators are used, leading to a lack of consensus on many environmental indicators.

SFDR intends to prevent greenwashing, foster external and internal transparency, and ensure alignment between investment, compliance/risk, and marketing/distribution teams. Funds must reevaluate processes, tools, and policies, collect data, and develop a clear ESG strategy grounded in good governance, transparency, and