SFDR 2.0 – first draft of revised EU Sustainable Finance Disclosure Regulation leaked
On 6 November 2025, the first draft of the European Commission’s (“EC”) proposed amendments to the EU Sustainable Finance Disclosure Regulation (“SFDR”) was leaked (the “Proposed SFDR 2.0”).
The Proposed SFDR 2.0 follows the publication of the EC’s call for evidence in May 2025 (which you can read more about here). Although this is a leaked (and not official) version, the Proposed SFDR 2.0 is expected to be officially released on or around 19 November 2025, and the draft appears to be in substantially final form.
In this update, we summarise the most significant proposed amendments to the SFDR, as well as some proposed consequential amendments to the EU Taxonomy Regulation (“Taxonomy”). We will continue to monitor, and keep you updated, as the content of the Proposed SFDR 2.0 inevitably develops.
Proposed amendments to the SFDR
The key proposed amendments include:
| Change | Details | |
|---|---|---|
| 1. | Amended scope | Investment advice and portfolio management removed from obligations. |
| 2. | Removal of “sustainable investment” definition | To combat the current misaligned interpretations, similar concepts will instead be integrated into the proposed new product categories through concrete requirements (see row 6 below). |
| 3. | Removal of principal of “do no significant harm” | Concept effectively replaced by minimum exclusions of specific activities / sectors (based on the criteria for low carbon benchmarks, in line with the current approach under the ESMA Guidelines on Fund Names). These are integrated into proposed new product categories (see row 6 below). |
| 4. | Removal of entity-level principal adverse impact (“PAI”) disclosures | Entity-level disclosures removed entirely, and, as noted in row 3 above, the product-level use of the concept is replaced by minimum product-level exclusions that are aligned with the ESMA Guidelines on Fund Names. |
| 5. | Removal of entity-level remuneration policy disclosures | Entity-level disclosures removed. |
| 6. | New “sustainability-related financial product” categories | Introductions of product categories in place of currently Article 8 and Article 9 disclosures:
The EC is empowered to specify further details of things such as investment criteria and the presentation of information via delegated acts.
Interestingly, this system seems to make no allowance for “mixed” financial products, except to the extent they invest in other products that fall within the Article 7, 8 and/or 9 category (e.g. funds of funds). |
| 7. | Other products | Financial market participants (“FMPs”) are not prohibited from referring to information on sustainability aspects “of an ancillary nature” in regulatory disclosures for other products. But information should not be a prominent element of disclosures, and there are restrictions relating to naming and marketing communications.
A new Article 6a has been introduced allowing for “voluntary” transparency for these products. But it does not seem to be suggested that there would be a mandated format for this. |
| 8. | Disclosures | The new provisions in Articles 7, 8 and 9 empower the EC to specify that disclosures are presented in a particular way not exceeding two pages. This perhaps indicates that long and complex “pre-contractual disclosures” (“PCDs”) are being replaced with shorter discloses, potentially integrated into wider product disclosures.
Otherwise, Article 10 “website disclosures” and Article 11 “periodic disclosures” are still required for in-scope products, albeit potentially in simplified form. |
| 9. | Impact investing recognised | Article 7 and Article 9 products can elect to use “impact” in their names, provided certain conditions are complied with. |
| 10. | Treatment of sovereign debt | General purpose sovereign, sub-sovereign and supranational debt are excluded from counting towards the numerator for the thresholds of Article 7 and 9 products, but can be used for the thresholds for Article 8 products. Such debt with a known use of proceeds can be included in the numerator for all financial products.
Minimum exclusions do not generally apply to these types of debt. |
| 11. | Use of data | New provisions have been inserted regarding use of data and estimates. These require FMPs to formalise and document their arrangements for using data and their methodologies for estimates. Certain information must be provided on request to clients. |
| 12. | Grandfathering | FMPs can choose to not apply the revised rules to closed-end type financial products that were created and distributed before the implementation of the revised rules. Otherwise, pre-existing products will need to comply with the new rules. |
| 13. | Professional opt-out | FMPs can also choose not to apply the new product categories to AIFs made available exclusively to professional investors. It is somewhat unclear what restrictions such funds would be subject to in terms of sustainability disclosures, as for example certain restrictions on naming and marketing appear to apply to them, but the exact meaning of these restrictions is somewhat unclear. |
| 14. | EC, not the European Supervisory Authorities, to develop delegated acts | The EC will work on new level 2 rules relating to naming, criteria for product categories, and new simplified disclosure templates. |
| 15. | Removal of product level Taxonomy disclosures | The EC has proposed removing Articles 5-7 of the Taxonomy, which currently require additional information to be included in the PCDs for Article 8 and Article 9 SFDR-aligned products. |
| 16. | Application | Whilst an application date is not yet written into the proposal, the implication of a 12 month transitional provision for IBIPs, pension products, pensions schemes and PEPPs seems to be that the changes would apply sooner for funds (which are not covered by the transitional provisions). |
