The Sustainable Finance Disclosure Regulation (SFDR)

The SFDR is the frontrunner of the set of regulations resulted from the European Action Plan for Financing Sustainable Growth. The aim is to provide more transparency on sustainability within the financial markets in a standardised way, thus preventing greenwashing and ensuring comparability. SFDR regulation introduces various disclosure-related requirements for financial institutions at entity, service and product level. This new disclosure obligations will be applicable as of March 10th 2021.

The SFDR mainly applies to financial institutions (banks, insurers, insurance intermediaries, asset managers and investment firms) operating within the EU. The requirements applies to financial products such as:

Discretionary portfolio management by credit institutions or investment firms

Alternative investment funds (AIFs) and UCITs (investment funds)

Insurance-based investment products (IBIPs)

Pension products, Workplace pensions products regulated under the IORP directive and PEPP

As a result of the SFDR, financial institutions must make certain (ESG-related) sustainability information public at an entity and product level. This information must be provided on the website and in the pre-contractual phase and in addition, in a later phase, periodic information will be provided via reporting. These information obligations apply to all financial market parties, regardless of whether they are specifically concerned with sustainability or not.

At the entity level, multiple disclosures are required in the investment process and when providing investment advice

Disclosure is required on whether sustainability risks are included

Disclosure on whether or not any negative sustainability effects are taken into consideration (Principle Adverse Impact - PAI)

We also take sustainability into account in ING's remuneration policy. ING's remuneration policy aims to enable us to attract and retain qualified and knowledgeable leaders and other staff. The remuneration policy encourages good performance and takes risks into account. It aims to have a balance between short and long-term value creation and to build on a long-term responsibility towards customers, society and other stakeholders. ING's remuneration policy discourages (excessive) risk-taking in relation to sustainability. Remuneration and similar incentives of SFDR Staff shall promote sound and effective risk management with respect to sustainability risks so that the structure of the remuneration does not encourage excessive risk‐taking with respect to sustainability and is linked to risk‐adjusted performance. In this respect a sustainability risk means an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment.

ING's policies:

• ING policy and disclosures on sustainability risks and characteristics
• Principal Adverse Impact Statement for Financial Market Participant (FMP)
• Principal Adverse Impact Statement for Financial Advisor (FA)
• Responsible Investment Guidelines

Transparency requirements with regards to sustainability also apply at a product level. The pre-contractual information must indicate how sustainability risks are taken into account in investment decisions and within advice, how this affects the expected return or why they are not relevant. If a sustainable product is offered, additional information requirements apply. Additional information about the sustainability of the investments must then be provided to prevent all kinds of investments from being incorrectly advertised as "green" or "sustainable" ("greenwashing").

Under the SFDR regulation there are different product categories:

Financial products having sustainable objectives (article 9)

Financial products promoting environmental or social characteristics as part of the broad investment strategy (article 8)

Financial products that either consider ESG risks as part of the investment process or are explicitly declared as non-sustainable (article 6). There is a difference between products taken sustainability risk into account and those who do not.

Visit our website on sustainable and responsible investments