Zeidler supports funds on ESMA SFDR alignment

July 8, 2025

As ESMA closes its review for the first half of the year, it has released its Final Report on the 2023–2024 Common Supervisory Action (CSA) focused on sustainability disclosures under the Sustainable Finance Disclosure Regulation (SFDR), offering fresh insight for fund managers and compliance teams navigating an evolving regulatory environment.

Zeidler Group, which offers compliance tools for investment funds, recently delved into the report and what it means for fund managers and compliance teams.

The report acknowledges improvements but underlines that gaps remain in the integration of sustainability risks at entity and product levels under the SFDR. While the report does not address potential SFDR revisions currently under discussion, it will help firms prepare for the heightened expectations shaping the European regulatory agenda.

Funds operating under Article 6 SFDR have not escaped regulatory attention, with ESMA observing that some managers are using environmental imagery, including wind turbines and wildlife visuals, that may give a misleading impression of the fund’s sustainability profile, Zeidler noted. The key message is that visuals in marketing must align with the actual sustainability disclosures provided.

Governance remains a challenge for Article 8 strategies. ESMA has identified that many fund managers claiming to assess “good governance” within portfolio companies often lack detailed procedures on engagement thresholds, timeframes, and escalation processes, exposing these claims to regulatory questioning, Zeidler said.

ESMA’s report also highlighted inconsistencies in how firms determine what qualifies as a sustainable investment, with overly general references to the UN Sustainable Development Goals (SDGs) falling short of fair and clear communication standards. Firms are reminded that claims around the SDGs must be backed by clear evidence and well-defined methodologies to meet regulatory scrutiny.

The report notes that many UCITS managers and AIFMs continue to use outdated sustainability risk frameworks that are no longer aligned with current supervisory expectations.

Zeidler’s Marketing Material Review Tool (MMR-Tool) incorporates the expectations set out in the Supervisory Briefing and checks materials automatically against ESMA’s guidance and global standards, helping managers identify and address issues before regulators take action.

Read the story here.