S SFDR The Sustainable Finance Disclosure Regulation (SFDR) is a European regulation that makes it mandatory for financial companies to communicate extra-financial information on each of their products and to classify them according to the following typology: – Article 6 (only) funds do not integrate any kind of sustainability into the investment process (“non-sustainable” products) – Article 8 funds promote environmental or social characteristics (“light green” products) – Article 9 funds have sustainable investment as its objective (“dark green” products) The SFDR became applicable on 10th March 2021 (Level 1). The SFDR requires a detailed Regulatory Technical Standard (RTS) – Level 2, to be published before market participants have a complete picture of how the legislation is intended to be applied. Level 2 disclosure requirements (which also include Taxonomy -related disclosures) will apply from 1 January 2023. Scopes 1, 2, 3 There are generally three key “scopes” for categorising carbon emissions: Scope 1 : Direct emissions generated on site, for example at company facilities or via company vehicles. Scope 2 : Indirect emissions generated from electricity purchased or used by an organisation Scope 3 : All other emissions that are related to an organisation’s activities, but not under its direct control – for example because they are generated by suppliers, or because they are associated with the use of a company’s products. Social bonds Social bonds are bonds where the proceeds finance projects with positive social outcomes. The Social Bond Principles are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Social Bond market by clarifying the approach for issuance of a Social Bond. SRI Sustainable and responsible investing (SRI), sometimes also referred to as “Socially responsible investing”, typically uses ESG factors to apply negative or positive screens on the investment universe. Market terminology AllianzGI Sustainable Investing – Glossary 16