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 Sustainable Finance Disclosures Regulation (SFDR)

Sustainable Finance Disclosures Regulation (SFDR)

Sustainable Finance Disclosures Regulation

(Regulation (EU) 2019/2088)

The policy agenda known as the EU sustainable Finance Action Plan, included mandatory reporting and disclosure regulations in the form of the Sustainable Finance Disclosures Regulation (SFDR). The SFDR establishes a hierarchy of categories based on investment focus.

Compliance with the SFDR regulation is mandatory for organisations promoting and distributing products and supplying portfolio management services into the EU. The regulation specifically applies to Stewart Investors funds within the First Sentier Investors Global Umbrella Fund plc. The reporting and disclosures are also relevant to our segregated mandate clients based in the EU.

All in scope products have to report under Article 6 on whether ESG is integrated into investment decisions. Products may also be classified as Article 8 (if they promote environmental or social characteristics) or Article 9 (if they have a sustainable investment objective). The Sustainable Funds Group strategies are aligned to Article 9.  

Article designations for our strategies 

What does Article 9 require us to do?

While Article 9 categorisation does not change our investment objective or our approach, it does require us to change the way we explain, illustrate and report the sustainable development objectives and contributions of our approach. We have been evolving our articulation over the last two years and examples of the steps we have taken include our work on Human Development PillarsProject Drawdown climate solutions and Portfolio Explorer which provides information on the investment rationale for every company we invest in, the contribution it makes to sustainable development, key risks and engagement topics.

Below is a summary of disclosures and explanations required for the official product documentation.

Sustainable investment objective

Our strategies seek to achieve long-term capital appreciation by investing in companies which both contribute to and benefit from sustainable development, achieving positive social and environmental sustainable outcomes.

  • Positive social sustainability outcomes include the enablement of improved health and wellbeing; access to income-generating and enterprise opportunities; fair employment and workplace safety; access to education and learning opportunities; communication and access to information; financial inclusion; sustainable transport and mobility; better access to housing, water, sanitation and electricity; and social inclusion and reduced inequality.
  • Positive environmental sustainability outcomes include more careful, efficient and productive use of natural resources; reduced waste and improved waste management; the wider adoption of circular economy practices and measures; the adoption of renewable and cleaner energy technologies; reduced greenhouse gas emissions; reduced water, air and other environmental pollution; a slowing in the rate of land degradation, land use change and loss of forests and biodiversity; and measures and technologies that enable climate change adaptation and resilience.

The hallmarks and binding elements of our investment strategy are an exclusive focus on companies that contribute to and benefit from sustainable development; a research-driven, fundamental, bottom-up approach to the selection and ongoing analysis of investments; a focus on the quality and sustainability attributes of every company; a focus on company stewardship and sound governance; a long-term investment horizon; and a commitment to engagement in order to address sustainability concerns and issues.

No significant harm to the sustainable investment objectives

Our investment process results in portfolios composed of companies without material exposure to harmful products and services. Our Position Statement on harmful and controversial products and services defines the harmful business activities we avoid as a result of our bottom-up approach.

For activities and practices we find inconsistent with our investment philosophy we have set a materiality threshold for direct involvement in the relevant activities of 5% of revenue. For tobacco production and controversial weapons the threshold is 0% of revenue. In the instances, we may make investments where exposure is above the stated threshold we disclose this on a quarterly basis. 

Sustainability indicators

Our strategies only invest in companies that are sustainable investments which contribute to a social and/or environmental objective. The contribution of investments to the social and environmental objectives are assessed by reference to two framework indicators – our human development pillars and Project Drawdown climate change solutions. 

Human development pillars - We have developed our own 10 human development pillars inspired by the United Nations Human Development Index that we believe encapsulate the essence of human development and which can be mapped to companies. Each investee company must be contributing in a tangible way to at least one of the pillars.

Visit our Portfolio Explorer tool to find out more about the pillars and the diverse contributions companies are making to human development.

Climate change solutions - Project Drawdown is a non-profit organisation, founded in 2014, which has mapped, measured and modelled over 80 different solutions to global warming, with the ultimate goal of reaching drawdown – i.e. the point in the future when emissions stop increasing and start to steadily decrease. We map each investment against the c.80 solutions. Our focus is on whether the companies themselves are making a meaningful contribution and will have meaningful involvement with the delivery of any of those solutions. 

Where investee companies do contribute to any of the solutions, they will be involved in making products and delivering services directly, by enabling/supporting those solutions, or indirectly.

Visit our Portfolio Explorer tool to find out more about the solutions and the diverse contributions companies are making to climate change.


The frameworks, alongside our own bottom-up analysis, lean on measurable and reportable outcomes as evidence for determining a company’s meaningful contribution to sustainable development.

Meaningful company contribution:

  1. Demonstrates a clear link to the underlying issue and solution, including whether the contribution is direct, enabling/supporting or indirect.

  2. Is relevant for the company either as a revenue/growth driver, as strategic initiatives backed by research and development or capital expenditure, or a function of strong culture or behaviours and ‘how they do things’ e.g. for equality and diversity.

  3. Recognises negative impacts from the company, including contradictions and risks of perverse outcomes.

The SFDR Level 1 reporting template for each of our Article 9 funds within the First Sentier Investors Global Umbrella Fund plc are now available via the 2021 Annual Report. The social and environmental outcomes for the Funds are also available on the ESG reporting page.

Below are links to the firm-level disclosures required to be made under SFDR by the First Sentier Investors group.

Article 3 – Policy relating to the integration of sustainability risks in our investment decision-making process.

Article 4 - Transparency of adverse sustainability impacts at entity level – Principal Adverse Impacts Statement.

Article 5 - Transparency of remuneration policies in relation to the integration of sustainability risks.

Article 6 - Transparency of the integration of sustainability risks.

Article 10 - Transparency of the promotion of environmental or social characteristics and of sustainable investments on websites.

The Prospectus for the First Sentier Investors Global Umbrella Fund plc includes an SFDR appendix disclosing the required pre-contractual information and Fund categories.

The 2021 Annual Report for the First Sentier Investors Global Umbrella Fund plc contains SFDR Level 1 reporting templates.

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