SFDR vs CSRD
SFDR targets financial market participants — asset managers and advisers. CSRD targets the companies those investors invest in. Both are mandatory EU regulations, both require ESG disclosure, but they operate at different levels of the investment chain.
SFDR and CSRD work together — CSRD generates the company-level sustainability data that SFDR uses for fund-level disclosure. If you are a corporate, CSRD is your regulation. If you are a financial product, SFDR is yours. Both are mandatory in the EU.
Who each regulation applies to
SFDR (Sustainable Finance Disclosure Regulation) applies to financial market participants — asset managers, fund managers, insurance companies offering investment products, and financial advisers operating in the EU. It requires them to disclose how they integrate sustainability risks into investment decisions and how their products affect sustainability.
CSRD applies to the companies that asset managers invest in — large EU companies and non-EU companies with significant EU operations. It requires them to disclose their own sustainability performance using ESRS standards.
The data connection between SFDR and CSRD
SFDR and CSRD are designed to work together. SFDR requires asset managers to disclose Principal Adverse Impacts (PAIs) — the negative sustainability impacts of their investments. To calculate PAIs, asset managers need sustainability data from the companies they invest in.
CSRD companies provide that data. CSRD-compliant reports feed directly into SFDR PAI calculations. As more companies report under CSRD, asset managers can move from estimated PAI data to actual CSRD-sourced data — dramatically improving SFDR report quality.
Article 8 and Article 9 funds
SFDR classifies investment products into three categories: Article 6 (no sustainability claim), Article 8 (promotes environmental or social characteristics), and Article 9 (sustainable investment objective). Article 8 and 9 funds face the most stringent disclosure requirements.
Portfolio companies of Article 8 and 9 funds — even if not in CSRD scope — face significant pressure to provide CSRD-equivalent data to satisfy their investors' SFDR obligations. SFDR is therefore a major driver of voluntary ESG reporting beyond the formal CSRD scope.
SFDR vs CSRD — side by side
| Aspect | SFDR | CSRD |
|---|---|---|
| Applies to | Financial market participants | Large companies |
| Focus | Investment product sustainability | Company sustainability performance |
| Key disclosure | PAI, product classification | ESRS standards, double materiality |
| In force | 2021 (phased) | 2023 (phased) |
| Enforcer | ESMA / national FCA equivalents | National company law regulators |
| Product labels | Article 6, 8, 9 | N/A |
| Data relationship | Uses CSRD data for PAI calculation | Provides data for SFDR |
| Assurance | Not mandated | Mandatory |
Frequently asked questions
Do I need to comply with both SFDR and CSRD?
Only if you are both a financial market participant AND a large company. Most companies face only one: asset managers face SFDR, corporations face CSRD. Some large financial groups face both.
Does CSRD data satisfy SFDR PAI requirements?
Yes. CSRD-compliant sustainability reports provide the company-level data that asset managers need to calculate Principal Adverse Impacts under SFDR. This is a key design feature — CSRD feeds SFDR.
If I am not in CSRD scope, do I still need to report for SFDR?
Not directly. But if you receive investment from Article 8 or 9 funds, your investors will request SFDR-compatible ESG data. Prepare basic sustainability data aligned with VSME or GRI to satisfy these requests.
What is SFDR 2.0?
The European Commission proposed significant changes to SFDR in late 2025 — SFDR 2.0 — simplifying product categories and improving fund labelling. Final rules are expected in 2026. Monitor developments if you are in financial services.
What are SFDR PAIs?
Principal Adverse Impacts are the negative effects that investment decisions have on sustainability factors — for example, portfolio companies' GHG emissions, water consumption, or board gender diversity. SFDR requires asset managers to measure and disclose PAIs from their portfolios.