ESG regulatory landscape

The EU's Sustainable Finance Disclosure Regulation (SFDR) introduces new rules for how investment managers need to incorporate and disclosure sustainability risks.

SFDR also introduced a new taxonomy for funds that report to specific metrics as required by Article 9, 8+, 8, or 6 investment products.
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This taxonomy classification system focuses on how firms need to identify their economic activities that are deemed 'environmentally sustainable.' These activities must:
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- Contribute to the six environmental objectives and align with screening criteria
- Do no significant harm (DNSH) to any other environmental objective
- Comply with minimum social safeguards
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The 11 TCFD recommendations are focused on four main areas: governance, strategy, risk management, and metrics.

The EU and other countries are starting to move to mandate these recommendations in the coming years, and in doing so, greatly improve the quality, and transparency of climate-related financial disclosures to have the key information to better assess key climate change issues.
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New MifID requirements went into effect across the EU on August 2, requiring Financial Advisors to assess and serve the sustainability preferences of every client.

Advisors must explain sustainable investment, gather their clients' sustainability preferences, deliver investment products that align with client preferences, and report
on the portfolio's alignment.
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