If your bank has recently started asking for ESG data — carbon emissions, governance practices, workforce diversity — you might be wondering why. The answer is almost certainly the SFDR: the Sustainable Finance Disclosure Regulation.
What Is SFDR?
SFDR (EU Regulation 2019/2088) requires financial market participants — asset managers, banks, pension funds, insurers — to disclose how they integrate sustainability risks into their investment decisions. It also requires them to classify their financial products into three categories:
| Category | What it means | ESG data needed from companies |
|---|---|---|
| Article 6 | No specific sustainability claim | Minimal |
| Article 8 | "Light green" — promotes environmental or social characteristics | Moderate — PAI indicators |
| Article 9 | "Dark green" — has sustainable investment as its objective | Extensive — taxonomy alignment, full PAI |
The PAI Connection
Under SFDR, financial institutions must report on 14 mandatory Principal Adverse Impact (PAI) indicators and select additional ones. These indicators require data from portfolio companies — the companies they invest in or lend to.
- GHG emissions (Scopes 1, 2, and 3)
- Carbon footprint and GHG intensity
- Energy consumption and share from non-renewable sources
- Biodiversity-sensitive area activities
- Water emissions, hazardous waste
- Gender pay gap, board diversity
- Human rights violations, anti-corruption policies
When a bank classifies a fund as Article 8 or 9, it must collect PAI data from every company in that fund. If you are a borrower or portfolio company, you become a data source — whether you are large or small.
Why SMEs Are Affected
Even though SFDR does not directly apply to SMEs, the data cascade is unavoidable:
- Your bank needs your emissions data to calculate the carbon footprint of its loan portfolio
- Venture capital and private equity funds with Article 8/9 products need ESG data from every portfolio company
- Public pension funds (common in Nordic countries) are aggressively classifying towards Article 9, requiring comprehensive data from all investees
VSME as the Answer
The VSME standard was specifically designed to help SMEs respond to these data requests in a structured, standardised format. The Basic Module covers the core PAI indicators, making it the simplest way to give your bank or investor the data they need without building a custom reporting process from scratch.
When your bank asks for ESG data, ask them: "Would a VSME Basic Module report satisfy your requirements?" In most cases, the answer is yes — and it positions you as a proactive, well-prepared company.