ESAs Update Their Consolidated Q&A on SFDR

The Consolidated Q&A document on the Sustainable Finance Disclosure Regulation (SFDR) saw its previous major update in July 2024, when ESMA published its official proposal for a better EU SFDR. And one year later, on 4 August 2025, the European Supervisory Authorities (ESAs) published a formal announcement providing an updated version of these Q&A on the implementation of SFDR, which addresses very specific operational challenges that market participants have encountered since the Regulation’s full application. The new topics are focused around measurement methodologies and allocation calculations, and cover the below aspects:

• Product Disclosures:

  • Minimum proportions of sustainable investments allocation in pre-contractual disclosures.

  • Reporting on top investments in periodic disclosures.

• Entity disclosure (PASI Statement):

  • Water usage definitions referencing ESRS standards.

  • Building measurement standards (“per square meter” clarification).

Minimum Proportions of Sustainable Investments – New Question

One topic which has seen a lot of discussions on the market is the reporting of Sustainable Investments as part of the pre-contractual disclosure. In response, the ESAs are now providing a detailed clarification on whether separate minimum allocations for environmentally sustainable investments and socially sustainable investments must add up to the total minimum commitment for sustainable investments, which are some of the main elements within the Asset Allocation graph as part of the official RTS template.

It that sense, the document clearly states that the values for environmental and social sustainable investments are representing the “minimum” percentages and may not equal the total minimum commitment. In such cases, Financial Market Participants (FMP) should, however, include an explanation in the asset allocation section of their pre-contractual documents to clarify the reasons behind.

Reporting on Top Investments in Periodic Disclosures – New Question

Another question which has been widely discussed, is how to calculate “top investments” in the dedicated section “What were the top investments of this financial product?“ as part of the periodic report. In their latest publication the ESAs confirm there is no specific prescribed method for calculating top investments and thus, there isn’t a strict requirement for using either quarterly snapshots, or a single year-end snapshot. Rather, FMPs are reminded that they should refer to sectoral legislation as their guide, such as Alternative Investment Fund Managers Directive (AIFMD) requirements for AIFMs’ annual reports.

“Water Usage” Definition – New Question

The next topic on which more guidance is provided by the ESAs is the definition of “water usage” for the optional Principle Adverse Impact (PAI) indicator “Water usage and recycling” (PAI 6 from Table 2) for investee companies, noting it is not defined in the RTS, nor is it a common term in the Carbon Disclosure Project (CDP) nomenclature. Here, FMPs are encouraged to refer to the definitions in Corporate Sustainability Reporting Directive (CSRD)’s European Sustainability Reporting Standards (ESRS) for “water consumption”, “water intensity” and “water recycled and reused” to support this PAI calculation. The ESAs have even provided direct links between the PAI metrics and the ESRS terms:

• “Average amount of water consumed by investee companies per million EUR of revenue” corresponds to ESRS “water intensity“.

• “Weighted average percentage of water recycled and reused” corresponds to ESRS “water recycled and reused“.

Building Measurement Standards “Per Square Meter” – New Question

Looking into the optional PAIs for real estate asset, a new question has been raised as to how should the “per square meter” metric for the optional PAI on “Energy consumption intensity” (PAI 19 from Table 2) be calculated. There appears to be a confusion over whether to use gross internal area, net internal area, or useful floor area. The clarifications provided by the ESAs point to the standard for “useful internal floor areas” from the EU Taxonomy Regulation, alongside the definition for “useful floor area” in Energy Performance of Buildings Directive 2024/1275.

Bottom Line for Your Organisation’s SFDR Compliance

Maintaining compliance readiness in line with the different EU sustainability reporting standards, including SFDR and CSRD, is a task for which you can count on the support of a credible and trustworthy partner like cleversoft. The quickly evolving regulations will never again be a challenge for you as cleversoft’s reporting services will ensure your service adapts to new requirements in a blink of an eye. Get in touch to learn how we can support your compliance efforts and boost operational efficiency.