Skip to main content Skip to footer

The Sustainable Finance Disclosure Regulation

Comply or Die?

Is non-compliance with full SFDR a commercial gamble?

Horse racing is not a sport I follow, to be honest I would struggle to tell the withers from the croup, but in the 2008 Grand National I managed to pull ‘Comply or Die’ from the hat in the works sweepstake. I am not sure if this is what gave me the push into the wonderful world of compliance or merely an unforgettable name from an exceedingly rare win… either way, the name stuck.

ESG, since the point I began my career, has evolved from a niche that screened the "nasties" like tobacco or munitions from a portfolio to an industry “mega-trend” or even something more than just a trend. It is certainly on the forefront of governments, corporates and, most importantly, consumers’ minds and agendas. Now, it should be firmly on all the desks within an investment house, not just a screening team in the front office. There’s potential that the push toward sustainable finance may lead to a complete overhaul of the investment management ecosystem.

The Sustainable Finance Disclosure Regulation (SFDR) is the first of the myriad of Sustainable Finance focused regulation that will aim to bring standardisation and commonality to our industry. The 10th March 2021 is the first date where all investment houses will need to focus on the incorporation of sustainability within their investment process through a new, or refined, sustainable investment policy. For firms, this means two simple things: comply, or explain.


If you decide to comply, you then begin the journey to change how you, and our industry, face up to the change in ecosystem initially through a more granular focus on sustainability. If you have over 500 staff you will have to comply by default, with a short reprieve. This means you will need to do the following:

  1. Create your sustainability risk policy (Sustainable risk is an environmental, social or governance issue which, if it occurs, could cause a material negative impact on the value of an investment)
  2. Live and breathe sustainability throughout your investment process by scanning for Principle Adverse Impact (you will need another policy for due diligence)
  3. Update your remuneration policies for how sustainability risks are considered
  4. Make public pre-contractual and periodic sustainability disclosures on a separate part of your website relating to your firms’ policy and products.
  5. Review all your products, including how they have been marketed, and categorise them by their intended objective – sustainable investment in the object; products that promote environmental or social change, including through the investment process; or ‘other’ products.

This is by no means easy and should not be considered as another green badge box-tick to add to the portfolio’s collection. With the 10th March looming, this deadline will be upon us very quickly. Changes will be required to prospectus and other pre-contractual documents, alongside website builds, product screening and the small task of approving a new policy through the governance structure and making the policy live. Time is ticking.


All investment houses will be caught by SFDR but there is a way out for those that do not believe that it is in their best interests to align with the SFDR requirements. I don't believe that Brexit will not absolve UK firms and Level 1 requirements of SFDR should be progressed for the 10th March implementation date. Firms with under 500 staff have the option not to comply. If you do decide to explain, then there are a couple of things that are worth considering:

  1. You still need to publish why you are not complying on a separate part of your website by 10th March 2021
  2. Your remuneration policy still needs to highlight how the firm takes sustainability risks into account
  3. Your pre-contractual information (fund offering docs) will need to explain why you do not consider Sustainability Risks to be relevant
  4. You need to check all your marketing material to ensure it is consistent and that you do not consider ESG or sustainability – ensure there is nothing that may contradict your stance

Even omission from full compliance still requires action with similar changes to offering documentation, prospectus, a website build and a thorough review of your marketing material to ensure you have not sold under the premise of an ESG focus. Again, time is ticking.

Comply or Die?

I understand that there may be perfectly good reasons why some firms may want to explain rather than comply with the onerous requirements of SFDR. Asset management has always been considered a traditional industry and one that is slow to move with the times. Retail and institutional investors, alongside regulators and governments, have sustainable finance and ESG firmly in their minds and hearts. The future of investment certainly points toward a focus on the impact of the decisions we make.

I do wonder that with the pathway toward a more sustainable future in full flow, if you do not comply then will you be left behind? This regulation is not a box-tick and requires careful consideration from implementation and ongoing management. In the not-too-distant future, we will see Taxonomy Regulation and changes to MiFID, AIFMD and IDD relating to Sustainable Finance. There is a strategic consideration as to how you position your business and a commercial consideration impacting your direct and intermediated clients. So, it is maybe not a case of ‘comply or die,’ but certainly a juncture that requires very careful consideration. 

For further detail on how Devlin Mambo can help with your strategy, approach and implementation of SFDR, please contact me directly or speak to your Devlin Mambo relationship contact.

About the author

Graeme Devlin

Graeme is a co-founder of Devlin Mambo and leads our Product & Distribution and Compliance & Governance practices.

Delivering a 360° service to the asset management industry

Devlin Mambo

We may use cookies to collect data and improve the performance of this website. For further information, please see our Privacy Policy.