- within Environment, Real Estate and Construction and Wealth Management topic(s)
On November 20, 2025, the European Commission (Commission) unveiled its long-awaited proposal to overhaul the Sustainable Finance Disclosure Regulation (SFDR). This marks a decisive shift from a complex disclosure regime to a streamlined, more intelligible product categorization framework.
Since its inception, SFDR has been a cornerstone of Europe's sustainable finance agenda. Yet, market practice turned Articles 8 and 9 into quasi-labels the original regulation never intended—fuelling inconsistent expectations, supervisory friction, and greenwashing risk.
Following two years of consultations, technical workshops, and stakeholder engagement, the Commission is pivoting towards simplicity: protect investors, reduce cost and complexity, and improve transparency without compromising sustainability outcomes.
Highlights of the proposal
The recast introduces a simplified categorisation regime and sharper rules for sustainability-related claims:
- Three new product categories: In place of Articles 8 and 9 being used as de facto labels, the Commission proposes three new criteria-based categories, mandatory if a manager wishes to make sustainability-related claims for the product's name or marketing.
- Protecting impact claims: Explicit naming rules safeguard impact claims from dilution.
- Streamline taxonomy use: No more mandatory taxonomy-alignment disclosures. Instead, products with environmental objectives must state if and how they use the EU Taxonomy to meet their 70% target. A 15% taxonomy-aligned share creates a safe harbour for contribution.
- Replace current PAI mechanics: Entity-level PAI statements and remuneration policies disclosures are gone. At product level, “Transition” and “Sustainable” categories adopt binary exclusions plus disclosure of principal adverse impacts and mitigation actions.
- Reduced scope: Financial advisers and portfolio management are carved out.
- Concise RTS templates: Level 2 RTS templates capped at two pages, with naming standards led by the Commission. At this stage, the text is a proposal and subject to trilogue negotiation and detailed Level 2 measures. However, the direction of travel is clear: lower administrative burden, clearer claims, tighter naming rules, more room for transition finance, and a pragmatic acknowledgement of data constraints.
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