EU Sustainable Finance Disclosure Regulation
The EU Sustainable Finance Disclosure Regulation (SFDR) is a new set of European Union rules that came into effect on March 10, 2021, with the goal of making the sustainability profile of funds more comparable and easy to understand for investors. They categorise products into specific types and include metrics for assessing the environmental, social and governance (ESG) impacts of the investment process for each fund.
As the name suggests, this regulation will place much more emphasis on disclosure. The information on this page describes our approach to SFDR and includes our policies and procedures, disclosed in accordance with these new rules.
Many of our clients will also be subject to these new requirements. Apart from our disclosures in prospectuses, annual reports and on this website, we will provide our clients with the information they need to comply with SFDR.
Background to SFDR and how it impacts Aviva Investors
SFDR is part of the EU’s wider Sustainable Finance Framework, which is backed by a broad set of new and enhanced regulations that will apply across the region. The framework includes the Sustainable Finance Action Plan, which aims to promote sustainable investment across the EU, and a new Taxonomy to categorise economic activity through a sustainability lens and help create a level playing field across the region.
Many of the new measures are a response to the landmark Paris Agreement on climate change in December 2015, and the United Nations 2030 Agenda for Sustainable Development published earlier the same year, which set out the 17 Sustainable Development Goals. SFDR and other regulations are also aligned with the European Green Deal, which aims for the EU to be ‘climate neutral’ by 2050.
Product classifications under SFDR
The most visible and impactful aspect of SFDR is the classification of funds and mandates into three categories, as laid out by Articles 8 and 9 of the SFDR and those funds not defined by either article, referred to as ‘neutral’ funds.
Neutral funds do not integrate any kind of binding sustainability controls into their investment process and can include stocks that may be excluded by ESG-focused funds, such as tobacco companies or thermal coal producers. While neutral funds are still allowed to be sold in the EU – provided they are clearly labelled as non-sustainable – they may not be promoted as ESG funds when matched against more sustainable products.
Among other characteristics, Article 8 products promote environmental or social characteristics, or a combination of those characteristics, provided the companies in which investments are made follow good governance practices.
Article 9, also referred to as ‘products targeting sustainable investments’, covers products targeting bespoke sustainable investments and those that have sustainable investment as their objective.
Aviva Investors fund classifications under SFDR
Currently, most funds managed by Aviva Investors will be classified as neutral under SFDR. We also have a number of Article 8 funds, including our Climate Transition range. We do not currently manage any Article 9 funds or mandates.
Aviva Investors has updated EU fund prospectuses, website product information and Key Investor Information Documents to align with SFDR rules where applicable, along with updated responsible investment policies shown below.
Adverse impact statement
We have described our current adverse impacts policy in our responsible investments policies for each asset class. Subsequently, and before the end of 2021, we will publish an adverse impact statement as specified by the SFDR regulation. The statement will describe how we measure the main adverse impacts of investee companies and other investment assets on sustainability factors.
It will use a system of 14 mandatory indicators for corporate issuers and a smaller selection of indicators for Government debt and real estate assets, with a range of additional voluntary indicators which we will select and relevant to various funds and our view of which impacts to prioritise the identification and mitigation of. Mandatory indicators range from carbon emissions, fossil fuel exposure and waste levels to gender diversity, due diligence on human rights and exposure to controversial weapons.
To meet the requirements set out under Article 5 of the SFDR, we have published additional information on remuneration and ESG in our Pillar 3 disclosure.
Asset Class Responsible Investment Policies
Credit & Equities - Responsible Investment & Sustainability Risk Policy
This policy describes how we integrate our responsible investment philosophy into each asset class investment process. Credit and Equities covers funds managed by Aviva Investors that primarily invest in equities and bonds and includes money market funds.
Multi-Asset & Macro & Liability-Driven Investment - Responsible Investment & Sustainability Risk Policy
This policy describes how we integrate our responsible investment philosophy into each asset class investment process, Multi-asset covers a wide variety of product types including Multi-Strategy, Multi-Asset ranges, Fund of Funds, Liability Driven Investment, Global Convertibles.
Real Assets - Responsible Investment & Sustainability Risk Policy
This policy describes how we integrate our responsible investment philosophy into each asset class investment process, Real Assets covers traditional real estate products and our alternatives real assets business including infrastructure equity and commercial property/private market debt.
Discover our responsible investment policies.
Aviva Investors Luxembourg Sustainability Risk Policy
Aviva Investors Luxembourg (AILX) recognises and embraces its duty to act as long-term stewards of clients’ assets, maintaining a deep conviction that environmental, social, and governance (ESG) factors can have a material impact on investment returns and client outcomes. This policy includes the key pillars AILX’s ESG approach including consideration of sustainability risk and how they apply to the funds we operate.
Luxemburg SICAV funds with SFDR ESG characteristics (article 8)
For more details of how the objective and policy of the Aviva Investors Climate Transition Global Credit Fund, Aviva Investors Climate Transition European Equity Fund, Aviva Investors Climate Transition Global Equity Fund and Aviva Investors Sustainable Income & Growth Fund works, including a description of their characteristics.
Responsible investment views
Without a global finance plan, the climate moonshot will fail
13 Oct 2021
If the world is to achieve the goals of the Paris Agreement, the international financial architecture needs far stronger coordination under a re-tooled OECD, writes Steve Waygood.
From outside-in to inside-out: Transforming finance for impact
8 Oct 2021
To meet the goals of the Paris Agreement, finance must embrace a holistic approach to managing its impact on the environment. Eric Usher, head of UNEP FI, talks to AIQ about this shift in focus and the importance of public and private sector collaboration.
Disclosures, trade-offs and green premia: The future of sustainability in real assets
7 Oct 2021
The path to a sustainable future for private markets is full of opportunity but also complexity, as Laurence Monnier and Ed Dixon explain.
Actions and words: An interview with Dale Vince
6 Oct 2021
The prominent climate change campaigner and founder of green energy supplier Ecotricity discusses biogas, the energy crisis and the need for a shake-up in government policy to achieve net zero in a wide-ranging interview with AIQ. Words by Miles Costello.
What does the data say? Ice meltdown, unicorns and green pensions
23 Sep 2021
In this month’s instalment of our visual series on topical data themes, we look at melting ice caps, the rising value (and volume) of ‘unicorn’ companies, and the hidden power of your pension.
The climate wars: Why rising temperatures mean rising conflict
23 Sep 2021
With tensions set to rise further as disputes over scarce resources intensify, we look at the geopolitical, economic and investment implications.
Crisis or opportunity of a lifetime? Rethinking the future of the planet
7 Sep 2021
Will a world beset with challenges spin into catastrophic breakdown or spur humanity to change and reach new heights? John Elkington, widely regarded as the ‘godfather of sustainability’, contemplates the future with AIQ.
What does the data say? Climate change, real yields and live TV
27 Aug 2021
In the latest instalment of our visual series on topical data themes, we look at the latest IPCC report, the significant decline in US real yields and people’s live TV versus streaming habits.
Pricing carbon: Taxing polluters is the only way forward
26 Aug 2021
Nearly three decades after it first agreed to tackle climate change, the world has failed miserably to curb the growth in CO2 emissions. To succeed, it urgently needs to establish an effective price for carbon.
24 Aug 2021
Can investors rely on data from companies about their efforts to reduce carbon emissions?
Climate emergency: The state of the planet
24 Aug 2021
The Intergovernmental Panel on Climate Change Sixth Assessment Report brings together conclusions from the latest scientific studies on the physical science of the climate system. Aviva Investors’ climate specialist Rick Stathers assesses the evidence and the implications for investors.
The going gets tough: Can heavy industry decarbonise?
23 Aug 2021
Heavy industry and heavy transport are hard to decarbonise, but this must be done to reach net-zero emissions by 2050. Can companies, policymakers and investors join forces to make it happen? The race is on…
Action now! Landmark legal ruling could have far-reaching implications for investors
23 Aug 2021
With climate action frustratingly slow, the legal profession is being called in to accelerate the pace of change.
Building brands that sell directly to consumers
20 Aug 2021
The trend towards selling goods and services directly to consumers is transforming consumer brands and the world of shopping. Companies are learning how to interact directly with consumers, using new marketing techniques and a vast amount of data to influence their behaviour. However, the relationship between brands and consumers is fragile, and allowing trust in a brand to erode can be fatal.
No more command and control: To deliver for clients, asset managers need to be agile
12 Aug 2021
Asset managers need to dismantle hierarchies and promote diversity of thought if they are to future-proof their businesses. They can learn valuable lessons from tech companies, military leaders and even ancient philosophers, writes Apiramy Jeyarajah.
Will accountants save the world? An interview with Richard Murphy
6 Aug 2021
A shake-up in company reports and accounts to consider companies’ environmental impact could radically alter the way they are assessed, argues the influential political economist and accountant.