The 2025 Sustainable Finance Disclosure Regulation (SFDR) reporting deadline is fast approaching. For many private equity and venture capital firms, this marks their first full reporting cycle under these evolving regulations. Navigating SFDR requirements can feel overwhelming—but with the right strategy, it’s also an opportunity to lead with transparency and build lasting investor trust.

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In this guide, we break down the key elements that private equity and venture capital firms should focus on as they gear up for SFDR reporting.

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What is SFDR?

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The Sustainable Finance Disclosure Regulation (SFDR) is a European initiative aimed at increasing transparency and standardizing disclosures in the financial sector’s approach to sustainability. It seeks to combat greenwashing and promote consistency in how firms report on sustainability risks and impacts.

Despite its name, SFDR applies to all financial market participants—not just those investing explicitly in sustainable assets. It’s a core part of the EU’s broader initiative to promote sustainable investing and drive accountability across the financial industry.

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Who must comply with SFDR?

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SFDR applies to all financial market participants (FMPs) and financial advisors based in or marketing to investors in the European Union. These participants include:

• Investment firms
• Asset managers
• Pension funds
• Insurance firms
• Banks
• Credit institutions offering portfolio management

Importantly, SFDR’s scope extends beyond the EU, meaning that international firms seeking European capital must also comply with SFDR requirements.

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What needs to be disclosed?

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Firms must provide disclosures at two levels: the entity level and the product (fund) level.

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1. Entity-level disclosures

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Entity-level disclosures explain how a firm manages sustainability risks overall. Key requirements include:

• Sustainability risk policy: a description of how sustainability risks are integrated into investment decisions (if at all).
• Remuneration policy: an explanation of how remuneration at the firm considers sustainability risks.
• Principal Adverse Impacts (PAI) statement: a statement detailing how the firm identifies and manages PAIs, covering 14 mandatory sustainability indicators. Firms are also required to disclose two voluntary metrics, in addition to any other relevant indicators. Firms with fewer than 500 employees are exempt from mandatory PAI reporting, but must explain why they are not reporting.

These disclosures should be made public on the firm’s website and included in marketing materials.

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2. Financial product-level disclosures

Each investment fund must be classified according to one of three SFDR categories, with specific disclosure obligations for each:

• Article 6: funds that either do not promote sustainability or consider sustainability risks but do not make them a core investment objective.
• Article 8 (“light green”): funds that promote environmental or social characteristics but do not have sustainable investments as their main focus.‍
• Article 9 (“dark green”): funds that have sustainable investments as their primary objective.

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Key reporting requirements for 2025

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For each article, firms must provide both pre-contractual disclosures (in marketing materials shared with potential investors) and periodic disclosures (annual reports on how sustainability objectives or characteristics are being met).

• ‍Article 6 funds, for example, must disclose how sustainability risks are considered in investment decisions and provide annual updates.‍
• Article 8 and Article 9 funds have more detailed reporting requirements, including an assessment of how environmental or social characteristics are being met, or how sustainable investment objectives are being achieved.

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How can Kara help private equity and venture capital firms comply?

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SFDR reporting can be particularly challenging for smaller or growing firms without extensive ESG infrastructure. That’s where Kara comes in.

Our platform simplifies and streamlines the entire SFDR reporting process:

1. Define: Kara automatically matches relevant SFDR indicators to each portfolio, ensuring complete data coverage for both mandatory and voluntary metrics.
2. Connect: easily link with your portfolio companies by uploading contacts, enabling smooth communication and efficient data collection.
3. Collect and measure: use smart surveys and API integrations to gather sustainability data directly from company systems, minimizing manual work.
4. Generate reports: automatically create SFDR-compliant reports, ready for inclusion in your marketing materials, website, and investor updates.

Unlike traditional manual approaches, Kara offers a scalable, user-friendly solution tailored to the unique needs of private equity and venture capital firms.

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Get started today

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At Kara, we believe that regulatory compliance is more than a requirement: it’s an opportunity to build trust, foster transparency, and drive meaningful change. Our mission is to empower private investors and companies to create a sustainable future and set new standards for responsible investing.

Don’t let SFDR reporting be a roadblock. Let it be a catalyst for positive change. Kara’s expert team and user-friendly platform are ready to support you on this journey.

Discover how Kara can make your SFDR compliance experience smooth, efficient, and impactful.

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Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Always review SFDR regulations in full and consult with legal professionals to ensure full compliance.

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