Sustainable Finance Disclosure Regulation

The Sustainable Finance Disclosure Regulation (SFDR) defines sustainability risk as “an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment.”

We recognise that sustainability risks (meaning an environmental, social or governance ("ESG") event or condition) can lead to outcomes that may have a negative impact on the value of investment returns. In our due diligence selection process to create the recommended universe of investment products, we will review the disclosures from our Financial Market Participant partners and assess how they have incorporated material sustainability risks/issues, among other factors which might also have an effect on performance, in their investment process and engagement activities (where applicable). We apply this process to investment funds and insurance-based investment products.

When selecting and advising on investment funds or insurance-based investment products, International Wealth & Premier Banking (IWPB) takes into consideration the sustainability risk (e.g. environmental, social and employee matters, human rights and anti-bribery/anti-corruption). Financial Market Participants of products that either have specific sustainable investment objective (SFDR Article 9) or products that promote environmental or social characteristics (SFDR Article 8) are required to report their contribution to sustainable investment and EU taxonomy. Doing no significant harm to other environmental or social objectives and following good corporate governance processes/social safeguards are required under Sustainable Investment and EU Taxonomy contribution. We gather this data through the European ESG Template (EET).

Should you require further information about how sustainability risks are incorporated in the products which we advise on, please contact your HSBC Financial Advisor.

Version: 1.2 - Publication date: 11 March 2026

The EU Sustainable Finance Disclosure Regulation ("SFDR") requires International Wealth & Premier Banking (IWPB), in our capacity as a financial advisor, to disclose whether and how we take into account principal adverse impacts on sustainability factors in our investment or insurance advisory process.

We use information published by Financial Market Participants ("FMPs") and a minimum set of adverse impacts that we evaluate for the suite of ESG and sustainable investing products (as classified according to our proprietary internal framework) that we advise on. We apply this process to investment funds and insurance-based investment products.

When selecting and advising on financial products, IWPB takes into account some of the adverse impact of the underlying investment on sustainability factors, based on data availability and alignment of client’s sustainability preferences and investment objectives.

For products that we have approved as ‘sustainably invested’ according to our proprietary internal framework and that have either specific sustainability goals as an objective (SFDR Article 9) or promote environmental or social characteristics (SFDR Article 8), we take into consideration certain Principal Adverse Impact Indicators ("PAIs"). These PAIs include exposure to controversial weapons and exposure to UN Global Compact violators and or OECD Guideline for Multinational Enterprises on Responsible Business Conduct violators.

More detailed information, including each PAI calculation methodology and limitations, is available in the methodology document:

https://www.assetmanagement.hsbc.co.uk/-/media/Files/attachments/common/pai-user-guide-en.pdf

The HSBC Life Assurance (Malta) Limited Sustainable Finance Disclosure Regulation (SFDR) is available as below:

Insurance Sustainable Finance Disclosure Regulation - HSBC Malta

Version: 1.2 - Publication date: 11 March 2026

Pursuant to article 5 of EU Sustainable Finance Disclosure Regulation (SFDR), HSBC Bank Malta p.l.c. is required to:

 (i) include in its remuneration policy, information on how the said policy is consistent with the integration of sustainability risks, and

(ii) publish and maintain this information on its website.

The remuneration policy, which can be found on the relative website page of HSBC Bank Malta p.l.c., is consistent with the integration of sustainability risks. To this end, HSBC Bank Malta p.l.c. has adopted sustainable remuneration practices which are geared towards mitigating the potential adverse effects (if any) of its variable remuneration model on the risk profile of the company. Indeed, even though the company’s variable pay pool is expected to fluctuate in accordance with its overall business performance, any variable remuneration awarded to the company’s employees shall be linked to the achievement of pre-defined targets which would have been set by the company at beginning of the year.

The main quantitative and qualitative performance and risk metrics used for the assessment of employee performance against the pre-defined targets referred to above are included in a balanced scorecard of clear and relevant objectives. The objectives included in the performance scorecards of senior management take into account appropriate measures linked to sustainability risks, such as: reduction in carbon footprint; facilitating financing to help clients with their transition to net zero; employee diversity targets; and risk and compliance measures. Additionally, a mandatory and measurable sustainability goal such as training is assigned to all employees across the board. The employees receive a behaviour rating as well as a performance rating, which ensures that performance is assessed not only on what is achieved but also on how it is achieved – thereby minimising the risk of engaging in undesirable practices (such as, for instance, behaviour which is to the detriment of the company’s sustainability efforts and/or adherence to sustainability-related laws and regulations) for the purpose of driving business and improving their financial performance at all costs.

Version: 4.1 – Publication date 11 March 2026

The EU Taxonomy Regulation is an EU-wide classification system which provides a common language to identify whether or not a given economic activity should be considered "environmentally sustainable". The main aim of the Taxonomy Regulation is to help investors making conscious, environmentally friendly choices, promote investments into sustainable products and at the same time, reduce the risk of greenwashing. The Taxonomy states that only activities which substantially contribute to one or more of the environmental objectives should be defined as being environmentally sustainable.

The EU Taxonomy specifies six environmental objectives:

• Climate change mitigation
• Climate change adaptation 
• Sustainable use and protection of water and marine resources 
• Transition to a circular economy
• Pollution prevention and control 
• Protection and restoration of biodiversity and ecosystems

For the purposes of establishing the degree to which an investment is environmentally sustainable, an economic activity shall qualify as environmentally sustainable where that economic activity:

• Contributes substantially to one or more of six environmental objectives
• Does not significantly harm any of the environmental objectives
• Is carried out in compliance with the minimum safeguards, which require alignment with the OECD Guidelines for Multinational Enterprises and UN Guiding Principles on Business and Human Rights, including procedures regarding human rights, labour rights, anti-corruption and taxation 
• Complies with technical screening criteria for determining “Substantial contribution” and “Do No Significant Harm” (DNSH)

The Taxonomy Regulation is integrated into SFDR disclosures such as Pre-contractual and Periodic Reports, where we provide detailed information on the minimum alignment to the Taxonomy Regulation conditions. Both SFDR Art.8 and Art.9 products must disclose minimum sustainable investments which are shown in detail, presented in the reports as a minimum percentage of Taxonomy Regulation alignment. The classification provides transparency on environmental performance and supports investors in making decisions on their future investments.

Version: 1.0 - Publication date: 11 March 2026

1. What is Sustainable Finance Disclosure Regulation (SFDR) and what is its purpose?

The Sustainable Finance Disclosure Regulation (‘SFDR’), Regulation (EU) 2019/2088, is a European Union (‘EU’) regulation introduced to improve transparency in the market for sustainable investment products. It helps EU investors to receive accurate information on their investment choices that are in line with their sustainability goals by ensuring that marketing documents (and periodic reports) are aligned with real practices. SFDR aims to make the sustainability profile of funds more comparable and better understood by end-investors.

2. What is SFDR Product Classification and what categories of products are specified by the regulation?

The SFDR establishes three classifications of investment funds and discretionary mandates as laid out by following articles:

• SFDR Article 6 covers products that do not promote environmental or social characteristics nor have sustainable investment as their objective. However, they must disclose how sustainability risks are integrated into the investment decisions and the likely impacts on returns
• SFDR Article 8 covers funds and mandates that promote environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices. Article 8 funds do not have sustainable investing as their core objective. These products may or may not commit to EU Taxonomy criteria and/or compliance with sustainable investments classification under SFDR
• SFDR Article 9 covers funds and mandates which have sustainable investment as their objective or a reduction in carbon emissions as their objective. An article 9 Fund must also incorporate good governance into the investment strategy.

3. What are sustainability indicators?

Sustainability indicators are measurable aspects of environmental or social systems that can be used to measure how the environmental or social characteristics promoted by Article 8 of SFDR article are attained. They represent quantitative information that can help to explain how measurements are changing over time. 

4. What is the ‘Do No Significant Harm (DNSH)’ principle about?

The ‘Do No Significant Harm’ principle sets out a rule by which taxonomy-aligned economic activities must not significantly harm any of the environmental objectives.

Sustainable Investments under SFDR must not significantly harm any environmental or social objectives. This principle was introduced to prevent investment processes which would focus on environmental or social objective without sufficient consideration for other objectives.