Quick Recap: SFDR Fund Classifications

Under SFDR, every EU fund must classify itself into one of three categories:

• Article 6: Funds that do not integrate ESG into their objectives or process, though they may apply basic exclusions (e.g., tobacco, weapons).
• Article 8: Funds that promote environmental and/or social characteristics, provided portfolio companies follow good governance.
• Article 9: Funds that have sustainable investment as their explicit objective.

These categories are parallel, not hierarchical. An Article 8 fund is not “less impactful” than an Article 9 fund, it simply frames ESG integration differently.

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What is a SFDR article 8 fund?

Article 8 funds promote environmental or social characteristics, but do not require a single sustainability objective. Instead, they integrate ESG factors into their investment process in a structured way.

Examples:

• A B2B SaaS fund that requires portfolio companies to meet standards on pay equity, cybersecurity, and tax transparency.
• A sustainability generalist fund investing across themes like equitable education, ethical mining, and rural healthcare access. Each company tackles different ESG issues, but the portfolio as a whole promotes ESG characteristics.

Key Requirements for Article 8:

• Complete pre-contractual disclosures in the SFDR template.
• Publish website disclosures explaining which ESG characteristics are promoted and how.
• Draft a responsible investment policy linking ESG integration to due diligence and ownership.
• Select KPIs to collect annually from portfolio companies.
• Provide annual periodic disclosures on how characteristics were promoted.

Article 8 funds are flexible and widely adopted. Many LPs now see Article 8 as the default entry point for credible ESG integration.

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What is a SFDR article 9 fund?

Article 9 funds are investment products with a sustainable investment objective at their core. These funds are often thematic or impact-focused — for example, climate transition or affordable housing.

Examples:

• A renewable energy infrastructure fund that invests only in wind, solar, or hydro projects.
• A female founder focused fund.

Additional Requirements for Article 9:

Article 9 comes with extra compliance obligations beyond Article 8:

• Principal Adverse Impacts (PAIs): Must disclose all mandatory PAIs plus at least one additional environmental indicator and one social indicator.
• EU Taxonomy Alignment: Must state whether the fund will align with the EU Taxonomy. If yes:
  • Conduct technical screening criteria per portfolio company.
  • Classify activities as enabling (supporting sustainable activities) or transitional (helping shift from unsustainable to sustainable).
• Due Diligence & Reporting Burden: This requires more granular data collection at the company level, often placing extra demands on portfolio companies as well as the fund manager.

These requirements make Article 9 funds more resource-intensive. However, they also align strongly with LPs that have impact mandates or need to demonstrate alignment with the EU’s sustainability goals.

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Which SFDR classification should a fund choose?

The choice between Article 8 and 9 is not about ambition. It’s about fit with the fund’s thesis and LP expectations.

• Article 8 may fit if:
  • You have a broad or sector-diverse thesis (e.g., SaaS, generalist VC).
  • ESG integration is important, but you don’t want to force-fit a single sustainability objective.
  • You want to meet the “baseline expectation” for LPs.
• Article 9 may fit if:
  • Your thesis is built on a clear sustainability goal (e.g., renewable energy, social impact).
  • Your LPs require strong ESG/impact alignment in mandates.
  • You’re prepared for more detailed due diligence and portfolio company reporting.

Common misconceptions regarding SFDR disclosures

1. Myth: Article 9 is “better” than Article 8.

Reality: They are different categories, not a hierarchy.

2. Myth: Negative screening makes you Article 8.

Reality: Exclusions alone are not enough; active ESG promotion is required.

3. Myth: Article 9 must always be fully EU Taxonomy aligned.

Reality: You must state whether you align, but not all sectors are covered by the Taxonomy yet.

4. Myth: Article 9 is only for large funds.

Reality: Smaller funds can also be Article 9 if their thesis is sustainability-first.

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What implications does a fund's SFDR classification have for LPs and fund managers?

For LPs:

• Article 8 funds are often the minimum bar for ESG allocation.
• Article 9 funds are attractive when LPs have specific sustainability mandates.

For Fund Managers:

• Misclassification risks regulatory scrutiny and reputational damage.
• Choosing the right classification improves fundraising efficiency and reduces due diligence friction.
• Being clear and consistent in disclosures builds trust with LPs and avoids accusations of greenwashing.

The Planicorn advantage

Many managers hesitate to pursue Article 9 because of the extra compliance burden from PAIs to EU Taxonomy technical screening.

But this doesn’t have to be overwhelming.

With Planicorn, funds can:

• Automate PAI data collection and annual reporting.
• Streamline EU Taxonomy assessments, including enabling vs transitional activities.
• Complete due diligence and disclosures in under 30 minutes per company.

This turns Article 9 compliance from a heavy lift into a manageable, repeatable process.

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The difference between Article 8 and Article 9 funds comes down to objectives

• Article 8 → promotes ESG characteristics, flexible across strategies.
• Article 9 → invests with a clear sustainable objective, requiring deeper due diligence and reporting.

Neither is “better” than the other. They are simply different classifications under SFDR. The right choice depends on your fund’s thesis, investor base, and capacity for reporting.

For managers, the key is to embrace transparency and consistency. Whether you’re Article 8 or 9, the funds that integrate ESG effectively will not just comply with regulation, they’ll attract capital, build trust, and stand out in a competitive market.

Ready to classify your fund? Contact us to see how Planicorn helps managers streamline SFDR compliance and ESG reporting.