Pre-Contractual Disclosures — Article 9 Templates

Article 9 pre-contractual disclosure templates in the RTS are more demanding than their Article 8 equivalents, reflecting the higher sustainability ambition of products with a sustainable investment objective.

In plain English: if Article 8 templates ask "what sustainability characteristics do you promote?" Article 9 templates ask "prove that every investment in your fund is genuinely sustainable." The bar is higher, the evidence required is more specific, and the DNSH (do no significant harm) assessment must be applied to each investment.

The templates require FMPs to demonstrate that every investment meets the three-part sustainable investment test and that the "do no significant harm" principle is applied rigorously across the portfolio.

The Two Article 9 Templates

Annex IV applies to Article 9 products with a designated reference benchmark, typically products tracking a Paris-aligned Benchmark (PAB) or EU Climate Transition Benchmark (CTB), or products using a custom sustainable index aligned with their sustainable investment objective.

Annex V applies to Article 9 products without a designated reference benchmark, products that pursue their sustainable investment objective through active management without reference to a specific index.

Annex V, Article 9 Without Benchmark

Section 1: "What is the sustainable investment objective of this financial product?"

This must be a precise, specific statement of the environmental or social objective the product aims to achieve. Vague language is not compliant. The objective must be tied to one or more of the environmental objectives under the EU Taxonomy (climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to circular economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems) or to social objectives.

Example of insufficient language: "This fund has a sustainable investment objective."

Example of compliant language: "This Fund's sustainable investment objective is to contribute to climate change mitigation, as defined by Regulation (EU) 2020/852, by investing in companies that have verified science-based emission reduction targets consistent with limiting global warming to 1.5°C above pre-industrial levels."

Section 2: "Does this financial product consider principal adverse impacts on sustainability factors?"

Unlike Article 8, Article 9 products are expected to consider PAI, this is implied by the DNSH requirement, since DNSH is typically assessed using PAI indicators. The template requires disclosure of:

• Whether PAI are considered (Yes/No)
• If Yes: which PAI indicators are used, how they are monitored, what thresholds trigger action, and how the information feeds into the sustainable investment assessment

For most Article 9 products, the answer should be Yes, with PAI indicators serving as the primary DNSH measurement mechanism.

Section 3: "What is the investment strategy?"

This section must describe in detail:

Sustainable investment criteria: The specific criteria that must be met for an investment to be classified as a sustainable investment within this product. This includes:

• How the investment contributes to the environmental or social objective (the contribution test)
• How DNSH is assessed for each environmental and social objective (the DNSH test)
• How good governance practices are assessed (the governance test)

Portfolio construction rules: Whether the fund invests in listed equities, bonds, private markets, or a combination. Whether it tracks an index or is actively managed. Whether derivatives are used and how (and whether derivatives used for hedging are consistent with the sustainable investment objective).

Exclusions: Any exclusions applied (beyond what is implied by the sustainable investment criteria). For example, many Article 9 climate funds exclude fossil fuel companies entirely.

Minimum proportion of sustainable investments: The template requires the FMP to state the minimum committed proportion of sustainable investments. Given supervisory expectations that Article 9 products target near-100% sustainable investments, this percentage should be high, typically 90%+ with the remainder reserved for liquidity management and hedging instruments.

Section 4: "What is the proportion of sustainable investments?"

This section presents the asset allocation breakdown:

• Minimum % committed to sustainable investments: e.g., 95%
  • Of which, minimum % with an environmental objective: e.g., 95%
  • Of which, minimum % aligned with EU Taxonomy: e.g., [%] (see Lesson 4.5)
  • Of which, minimum % with a social objective: e.g., 0%
• Maximum % of other investments: e.g., 5% (cash and derivatives for hedging)
  • Explanation of why other investments do not prevent attainment of sustainable objective

Section 5: "How does this financial product monitor the attainment of the sustainable investment objective?"

The monitoring framework must be described, including:

• How frequently the portfolio's compliance with sustainable investment criteria is assessed
• Who is responsible for monitoring (portfolio manager, compliance team, external verifier)
• What happens when an investment no longer meets the sustainable investment criteria (grace period, engagement, divestment)
• How sustainability indicators are tracked over time

Section 6: "What methodologies are used to assess, measure, and monitor sustainable investments?"

A complete description of the methodology for determining whether an investment qualifies as sustainable, including:

• Data sources for the contribution assessment
• Data sources and thresholds for DNSH
• Data sources for good governance assessment
• Any third-party certifications or frameworks used (e.g., Science Based Targets initiative verification, EU Taxonomy Technical Screening Criteria)

Annex IV, Article 9 With Benchmark

Annex IV adds the following sections to the baseline content:

"Why does the designated reference benchmark differ from a broad market index?"

The RTS (Recital 19, Article 26) requires FMPs to explain clearly why the designated index differs from a broad market index. The purpose is to help investors understand that the index has been specifically designed to pursue the sustainable investment objective, not simply to track general market performance.

The explanation should include:

• The index's eligibility criteria (how its universe is constructed)
• Any exclusions applied relative to a broad market index
• How the index's weighting methodology reflects the sustainable investment objective
• The index's tracked sustainability indicators and targets

"How is the financial product continuously aligned with the designated reference benchmark?"

This requires a description of the tracking methodology, whether full replication or optimised sampling is used, and how tracking deviation is managed. For products with a sustainable investment objective, the index alignment must be maintained continuously, not just at portfolio inception.

Key Differences from Article 8 Templates

Completing the Templates in Practice

FMPs completing Annex IV or V for the first time should:

1. Begin with the sustainable investment methodology, this drives all other sections
2. Map each section of the template to specific internal policy documents
3. Ensure quantitative commitments (minimum proportions) are achievable and have been stress-tested against the portfolio
4. Involve legal counsel in reviewing binding language to ensure commitments are enforceable
5. Align template content precisely with what the periodic report template (Annex V) will need to report on