The SFDR influence on the Private Equity industry. A qualitative study of the European case.

Abstract

The Sustainable Finance Disclosure Regulation (SFDR) effective from 10 March 2021 forces financial stakeholders active in Europe to disclose their sustainable practices in accordance with pre-defined rules to highlight impact investments and avoid greenwashing. This research aims to determine how this Regulation influences the day-to-day work of the PE industry in Europe, and if it contributes to the objective of climate neutrality that the EU has set itself. This work presents the perspectives of several PE professionals from different European financial centers, collected through qualitative interviews. Analysis of the interviews demonstrates that compliance with regulation helps to satisfy the sustainable ambitions of investors, while for fund managers it helps to differentiate them from the competition by adding value and diversification. However, because of the resulting changes to investment strategies and due diligence processes, Regulation represents reporting obligations and a significant workload for the industry. A few improvements and clarifications, as well as time, will make it clear whether this Regulation will help the EU achieve its objective. This work will contribute to future studies on possible new legislation and related topics.