As from 10 March 2021, financial market participants and financial advisers must apply the sustainability disclosure obligations set out in the Sustainable Finance Disclosure Regulation (SFDR).

The disclosure obligations apply to financial advisors and financial market participants, including inter alia fund managers (i.e. managers of alternative investment funds (AIFMs), UCITS management companies and self-managed AIFs and UCITS). For more information on the disclosure obligations set out in the SFDR, please read our previous article on sustainable finance disclosure.

Although non-EU AIFMs and sub-threshold (registered) AIFMs were not explicitly excluded from the scope of application of the SFDR, there was uncertainty as to whether the SFDR disclosure obligations were also applicable to these parties.

The European Supervisory Authorities (ESAs, consisting of the EBA, ESMA and EIOPA) requested clarification of the scope of the SFDR by raising priority questions in a joint letter to the European Commission (EC) on 7 January 2021.

On 26 July 2021, the EC published its long-awaited Q&A in response to the questions raised by the ESAs. Below we provide a summary of this Q&A and highlight three points, relating to: the applicability of the SFDR to (i) sub-threshold AIFMs and (ii) non-EU AIFMs, and the further guidance on the concept of promotion within the meaning of article 8 SFDR.

Applicability of SFDR to sub-threshold (registered) AIFMs

The EC clarifies in its Q&A that both entity and financial product related requirements of the SFDR are applicable to all sub-threshold AIFMs. Furthermore, the Q&A states that provisions in the SFDR which refer to provisions in the AIFMD which do not apply to sub-threshold AIFMs (i.e. information to be included in pre-contractual and periodic documentation made available to end investors under national law) should be complied with by sub-threshold AIFMs by analogy.

Applicability of SFDR to Non-EU AIFMS

The EC stipulates that for the purposes of the SFDR, a ‘financial market participant” includes an “alternative investment fund manager”, irrespective of whether the AIFM has its registered office in an EU Member State (EU AIFM) or in a third country (non-EU AIFM). When a non-EU AIFM gains market access to (one or more) EU Member States using a National Private Placement Regime, the non- EU AIFM must ensure compliance with the SFDR, including the financial product related provisions.

Guidance on “Promotion of environmental or social characteristics” under article 8 SFDR

The EC has indicated that an article 8 SFDR qualification is also possible if a fund complies with certain ESG requirements or restrictions (e.g. sectorial exclusions) on the basis of law or voluntary codes and these are promoted in the investment policy of the fund. The term “promotion” under the SFDR has a broad scope and includes direct or indirect claims, information reporting disclosures as well as an impression that the investments of the fund have an ESG focus. Promotion is furthermore not limited to a specific document or form and may include communications on paper as well as via electronic means (websites, electronic data rooms etc.).


Furthermore, the EC gave answers to three other SFDR related questions:

  • the application of the 500-employee threshold for principle adverse impact (PASI) reporting the EC clarifies that the 500-employee criterium is based on the entire group including non-EU subsidiaries. PASI disclosure for large groups should cover the activities of the parent undertaking only, and not of the entire group (unless group entities qualify as financial market participants or advisers themselves);
  • application of article 9 SFDR – the EC gave clarification on the design of the financial products subject to article 9 SFDR and the objective of “a reduction in carbon emissions”; and
  • the application of SFDR product rules to portfolio management – the EC states that there is no distinction between tailored or standardised products. Website disclosures must ensure data protection and confidentiality owed to clients. For standardised products, transparency of these solutions might be of a way of complying with disclosure requirements.

Should you wish to receive more information on this subject, please contact a member of our Fund Regulatory Team or your regular Loyens & Loeff contact.