The most important rule

Many investors trust marketing terms instead of verified information. As a result, they are regularly choosing funds that are not as sustainable as they think. SFDR requires fund providers to give clear information about how sustainable a product really is and what risks are involved.

The Sustainable Finance Disclosure Regulation (SFDR) should make it easy for investors to find sustainable fund products to prevent greenwashing. Green investing is a big term and is often not well understood. That is a major problem I see among investors. The new articles I will explain later should make it easier for investors to see the difference between funds. The AFM controls this and brings transparency to the market (Autoriteit Financiële Markten, z.d., “Verwachtingen”), which I, as an advisor, think is a good thing.

Practical tips for you as an investor

To find out for yourself that a fund is sustainable, you can always use the provider’s factsheet. You can find this on the provider’s website for the fund. This way you can see immediately how sustainable a fund is and if it’s following the rules.

What you also need to know is the difference between Articles 8 and 9 and which one suits you the best. In Article 8, you have more companies that score better than average on sustainability. Article 9 gives you a clear sustainability goal, which is more likely to suit you if you want to help contribute to a sustainable outcome. You decide what suits you the best.

Finally, you should be aware that funds all have different costs and returns. The costs are taken from your return, so always look at the cost percentage. Funds always have risks, and they may look the same but can be different in terms of the amount of risk involved.