SFDR articles 6, 8, and 9: what you need to know

April 10, 2024
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The Sustainable Finance Disclosure Regulation (SFDR), established by the European Union (EU) in March 2021, is revolutionising the financial sector via robust and comprehensive guidelines for effective transparency and accountability.

The regulation requires asset managers, investment firms, and other financial market participants (FMPs) to disclose environmental, social, and governance (ESG) characteristics of their investment products. It is empowering investors with reliable data and transparency to support and check any claims of sustainable investment.

The SFDR defines different disclosure requirements for the FMPs as per how each fund labels itself.

The fund could adhere to these requirements based on one of the three categories defined in the regulation, specifically Articles 6, 8, and 9.

Additionally, FMPs started labelling themselves as Article 6, 8, or 9 to communicate their sustainable investment policies within the SFDR's purview.

Whether you're new to sustainable investing or a seasoned pro, understanding the differences between these articles is crucial to making informed investment decisions.

By the end of this guide, you'll have the tools to easily navigate SFDR and invest sustainably with confidence. Let's dive in!

SFDR Article 6

Article 6 defines what needs to be disclosed by funds that have no sustainability focus.

It includes funds that do not prioritise sustainability in their investment strategy, i.e. it may include companies excluded from ESG funds, such as tobacco and thermal coal producers.

While these funds are allowed to be offered in the EU, they must be explicitly labelled as non-sustainable and transparently disclose that they do not consider ESG factors.

The scope of Article 6 is vast, covering all types of investment funds, including UCITS (Undertakings for Collective Investment in Transferable Securities) and AIFs (Alternative Investment Funds).

Essentially, Article 6 requires asset managers to disclose sustainability risks and their integration into funds.

Requirements for compliance

As per Article 6 of SFDR, the transparency of the integration of sustainability risks requires:

- FMPs to include descriptions of the following components in their pre-contractual disclosures:

  • How sustainability risks are incorporated into their investment choices.  
  • Results of assessments of probable impacts of sustainability risks on financial products’ returns.

- If FMPs consider sustainability risks as irrelevant, they must provide a succinct and clear explanation for this decision. This should be published in a separate section titled ‘no consideration of sustainable impacts’.

- If FMPs consider sustainability risks relevant, asset managers must:

  • State that they've incorporated these risks into their investment decisions.
  • Develop a process for the assessment and identification of the most significant risks.
  • Have a disclosure policy in place for mitigation and resolution of risks.
  • Outline the approach for achievement and monitor outcomes and execution.

Documents needed for disclosure policy as per Article 6

Once it has been ascertained whether sustainability risks are relevant or not, the fund manager and the fund need to consider how to document their disclosure policy as per the Article.

This disclosure policy ought to encompass:

  • An outline of the assessment process the fund manager employs to discern and rank sustainable elements pertinent to the fund.
  • The date of approval of the policies by the board of the fund or the fund manager.
  • The distribution of duties for enacting the policies within the organisation's structure and processes.
  • An explanation of the methods used to choose and pinpoint sustainability markers and evaluate the effects of these indicators.
  • A clarification regarding any potential inaccuracies inherent in those methods.
  • An overview of the utilised data sources.
  • Information on data acquired directly from invested entities or via third-party data suppliers.

Each fund should maintain a written record of the disclosure policy, which the fund’s board of directors should review and endorse on a yearly basis.

What are the implications for these Article 6 funds?

Article 6 funds, which do not have a sustainability focus, may face challenges due to the growing popularity of sustainable funds.

A study by MSCI found that integrating ESG factors often leads to better risk-adjusted returns over the long term.

As a result, non-sustainable funds may struggle to attract investors who prioritise sustainability and may underperform in comparison to sustainable funds.

SFDR Article 8: Light green funds

SFDR Article 8 products, also known as light green products, promote investments or projects with positive environmental or social qualities, or a combination of such characteristics, as long as the investments are made in enterprises that adhere to sound governance practices.

To determine whether a financial product meets the criteria of Article 8, financial market participants must use a variety of criteria, such as the United Nations' Sustainable Development Goals and the OECD Guidelines for Multinational Enterprises, in addition to conducting their own due diligence.

One example of a light green fund that complies with Article 8 is the BlackRock Sustainable Euro Bond Fund.

The fund invests in Euro-denominated fixed-income securities that promote sustainable development and adhere to good governance practices.

The fund provides pre-contractual and periodic disclosures that explain how it meets the requirements of Article 8, including information on how it selects its investments and how it evaluates their sustainability impact.

Requirements for compliance

For a fund to comply with Article 8, focusing on the transparency of the promotion of environmental or social characteristics in pre-contractual disclosures, it requires:

  • Information on how environmental or social characteristics are met.
  • Information on reference benchmarks, if an index has been specified, and how this index aligns with environmental and social attributes.
  • A reference to where one can find the methodology for calculating the index.

In essence, Article 8 pertains to funds promoting environmental and social objectives, going beyond merely considering sustainability risks. However, these funds do not have ESG objectives as core objectives - which makes them different from Article 9 funds.

Documents required

For Article 8 funds, regulatory template standards are used for disclosure in pre-contractual documents. For the latter, the fund needs to include a statement with necessary documents explaining the following:

  • Whether the fund intends to make any sustainable investments.
  • The fund’s promotion of environmental or social characteristics, if it does not have sustainable investment as its objective.
  • The details of any index that has been designated as a reference benchmark.
  • How a reference benchmark is aligned with the environmental and social characteristics promoted by the product.
  • Types of environmental and social characteristics promoted by the fund.
  • Fund’s investment strategy and how it is going to meet its binding Article 8 criteria.
  • The asset allocation plan for the fund in terms of ESG versus non-ESG products.
  • A summary of whether the fund acknowledges principal adverse sustainability indicators (PASIs) as its Article 8 feature.
  • Link to website product disclosures.

The fund's prospectus should clearly state that it promotes environmental or social qualities or a combination of such characteristics. The annual report of the fund should provide details about the investments made during the reporting period, including the fund’s adverse sustainability impacts, and explain how the investments align with the objectives of Article 8.

Benefits and limitations of Light Green funds

As per the European Parliament, light green funds can provide investors with an opportunity to invest in ESG initiatives while generating financial returns.

However, some light green funds may not provide the same level of impact as dark green funds or Article 9 funds, which specifically target sustainable investments.

So, while light green funds can be a step in the right direction for sustainable investing, investors may need to carefully consider the specific ESG initiatives promoted by these funds to ensure they align with their own values and goals.

SFDR Article 9: Dark green funds

Article 9 outlines the disclosure requirements for funds with distinct sustainability objectives, where majority of the portfolio consists of ESG-focused investments.

These funds are often called ‘dark green’.

The scope of Article 9 is broad, covering all types of financial products, including UCITS (Undertakings for Collective Investment in Transferable Securities) and AIFs (Alternative Investment Funds), that meet the requirements of sustainable investment goals and reference benchmarks.

One example of a dark green fund is the Allianz Global Investors' Global Sustainable Equity Fund, which aims to generate long-term capital growth while investing in companies that promote sustainability.

The fund defines its sustainable investment goal as investing in companies that support the UN Sustainable Development Goals and the Paris Climate Agreement.

Its reference benchmark is the MSCI All Country World Index, and it provides pre-contractual and periodic disclosures that explain how it meets the requirements of Article 9.

Requirements for compliance

For a fund to comply with Article 9 of SFDR it requires the following:

- Where a financial product has sustainable investment as its objective and an index has been designated as a reference benchmark, the information to be disclosed shall be accompanied by:

  • Information on how the designated index aligned with that objective.
  • An explanation as to why and how the designated index aligned with that objective differs from a broad market index.

- Funds should contribute positively to either society or the environment via sustainable investments, with a primary focus on non-financial goals.


Documents Required

To comply with Article 9, product-level pre-contractual disclosures should include a summary statement with different documents on:

  • The sustainable investment objective pursued by the fund.
  • The fund's investment approach, in alignment with its Article 9 objective.
  • The anticipated allocation of assets within the fund and across sustainable and non-sustainable investments.
  • A statement that the fund considers PASIs.
  • How the reference benchmarks correlate with the fund’s sustainability investment goal.
  • How the chosen index's alignment with this goal varies from a general market index.
  • Link to website fund disclosures.
  • Article 9(3) funds, targeting carbon emission reductions, must provide information on the Paris Climate Agreement-compliant benchmarks employed by the product. If these benchmarks are unavailable, they should disclose their primary evaluation methods.
  • Article 9(3) funds should aim for reduced carbon emission exposure to align with the long-term climate action goals established within the Paris Climate Agreement.

For product-level website disclosures, the following documents are needed apart from a summary:

  • Explanation of how the fund’s investments pose no significant harm to the fund’s sustainable investment objective.
  • Sustainable investment objective of the fund and its monitoring.
  • Investment strategy pursued, including the strategy pursued to meet sustainable investment objectives.
  • Allocation of investments for sustainable and non-sustainable assets.
  • Methodologies used to assess and monitor the realisation of sustainable investment goal.
  • Data sources and processing.
  • Constraints related to the methodology and data.
  • Due diligence conducted for underlying assets.
  • Engagement policies.
  • Achievement of sustainable investment goal by leveraging any reference benchmarks.

For Article 9 funds, product-level periodic disclosures are done via annual reports. These disclosures shall include documents highlighting:

  • The degree to which the fund achieved its sustainability investment goal during the reference period.
  • The fund's leading investments.
  • The ratio of sustainable to non-sustainable investments.
  • Measures implemented to achieve the sustainability investment goal during the specified timeframe.
  • For a fund aligned with a reference benchmark, a brief overview of the product's performance in relation to that benchmark.
  • For a fund focused on reducing carbon emissions as its sustainability goal, a brief overview of its alignment with the Paris Climate Agreement's objectives.

Benefits and limitations of Dark green funds

As per the European Parliament, dark green funds can offer investors the opportunity to invest in initiatives that have a significant positive impact on the environment or society while generating financial returns.

However, these funds may have higher management fees than other financial products, and their performance may be influenced by the performance of a small number of companies or sectors.

Nevertheless, if you are looking for a way to make a positive impact on the world while still generating returns, dark green funds are worth consideration.

Comparison and differences between SFDR Articles 6, 8, and 9

SFDR Articles 6, 8, and 9 aim to promote sustainable finance by increasing transparency and disclosure requirements for financial products.

Here are the key similarities and differences between the three articles:


The SFDR aims to increase transparency and standardisation in sustainable finance by requiring financial market participants to disclose the sustainability characteristics of their products.

It's crucial to understand the key differences between Article 6, 8, and 9, and their respective requirements for non-sustainable, light green, and dark green funds.

Navigating SFDR requirements may seem challenging, but with Apiday, you have the right tools and expertise at your disposal!

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SFDR articles 6, 8, and 9: what you need to know

It's important to meet SFDR requirements to not risk any non-compliance penalties!

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