SFDR 2025: What the New Consolidated Q&A Means for Financial Market Participants

On 4th August 2025, the European Supervisory Authorities (ESAs) published JC 2023 18, a fully consolidated Q&A on the Sustainable Finance Disclosure Regulation (SFDR) and its Delegated Regulation. Bringing together over 80 Q&As from both the European Commission and the ESAs, the document clarifies long-standing grey areas and sets a stricter tone on data, definitions, and disclosures.

This isn’t just guidance—it’s a compliance roadmap.

1. Scope: No More Exceptions

   
   

The Q&A confirms that sub-threshold AIFMs and non-EU AIFMs are fully within the scope of SFDR if they market funds in the EU. This includes the requirement to set up a website to host Article 10 product disclosures—no exemptions apply. Delegation to third parties does not remove the responsibility from the licensed firm.

2. Sustainable Investment: Freedom with Strings

   
   

SFDR allows firms to define what qualifies as a “sustainable investment” under Article 2(17), but they must clearly disclose:

• How the investment contributes to environmental or social objectives,

• How it passes the “do no significant harm” (DNSH) test, and

• That the investee follows good governance.

Relying solely on a transition plan is not enough. Importantly, firms must apply their definition consistently across all products.

3. Principal Adverse Impacts (PAI): Data Accuracy Matters

   
   

New technical clarifications include:

• “Current value” for calculations must reflect enterprise value without deducting cash.

• Short positions can be netted, but must not result in negative values.

• Firms are encouraged to show the percentage of PAI indicators based on estimated vs. reported data.

Entities with ≥500 employees must report PAI impacts at group level, including global subsidiaries.

4. Product-Level Disclosures Tightened

   
   

For Article 8 and 9 products:

• Designated indices must not be broad-market benchmarks.

• Managers must explain any mismatch in reported sustainable investment percentages.

• Liquidity and hedging allocations are allowed but must be justified.

5. Methodology and Data: Show Your Working

   
   

While the ESAs still allow methodological flexibility, the expectations are clear: every assumption, data source, and calculation must be transparent and auditable. Disclosures must be updated at least quarterly, using the most recent available data.

In Summary

The consolidated Q&A raises the bar for SFDR compliance:

• Exemptions are disappearing.

• Transparency and consistency are non-negotiable.

• Data quality is the new differentiator.

  
  

Firms should act now: review disclosures, align delegated managers, and prepare to defend their assumptions. The era of principles-based disclosure without evidence is over.

Get in Touch:

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Matthew Aquilina

maquilina@quazar.mt / +356 2388 4600