A financial management firm prepares an end$-$of$-$year client report describing the actions taken by the firm to integrate ESG into their investment strategies. The report begins by explaining that the firm has become a PRI signatory and how it will guide their investment behavior as follows:

$$Four of the six PRI Principles for Responsible investing which will guide how we will incorporate ESG into our investment activities are:

$1.$ We will incorporate ESG issues into investment analysis and decision$-$making processes

$2.$ We will be passive owners and incorporate ESG issues into our ownership policies and practices

$3.$ We will seek appropriate disclosure on ESG issues by the entities in which we invest

$4.$ We will each report on our activities and progress towards implementing the Principles$$

The firm operates in the EU for EU clients and the report also makes the following statements about the effect of EU legislation on the ESG integration strategy of the firm:

Statement $1$: The CSRD will require companies affected to disclose sustainability$-$related factors.

Statement $2$: The SFDR will require affected financial market participants to integrate sustainability into all their investment strategies.

The report concludes with a note describing how the firm holds and manages the assets for their clients.

Note: As a central part of our fiduciary responsibilities, we ensure that assets that we hold on behalf the asset owners are kept safe. We will ensure that these assets are carefully invested and managed in the long$-$term economic best interests of the asset owners.

QUESTION:

Which of the two statements provided regarding the impact of EU legislation on the firm$$s ESG investment strategy is$/$are correct?

Neither statement is correct

Only Statement $1$ is correct

Only Statement $2$ is correct

Both statements are correct