On 19 November 2025, the European Commission (“Commission”) put forward a set of amendments to the Sustainable Finance Disclosure Regulation (“SFDR”), the EU’s disclosure framework for financial products integrating environmental or social aims.
What is the review of the Sustainable Finance Disclosure Regulation?
On 19 November 2025, the European Commission (“Commission”) put forward a set of amendments to the Sustainable Finance Disclosure Regulation (“SFDR”), the EU’s disclosure framework for financial products integrating environmental or social aims.
The SFDR, formally Regulation (EU) 2019/2088 has applied since March 2021. It introduced a harmonised framework of sustainability-related disclosure obligations applicable to financial market participants and financial advisers operating across the EU. The regulation requires entities such as asset managers, pension providers and insurance undertakings to disclose how they integrate sustainability risks into their investment decisions, the degree to which their financial products pursue sustainability objectives, and the principal adverse impacts of investment decisions on sustainability factors.
Since the original regulation’s application in 2021, the framework has been criticised on the basis that the mandated disclosures are too long and complex and that the requirements have imposed unnecessary burdens and costs. The market’s use of the framework as a de facto product labelling regime, rather than a disclosure framework as intended by the legislators, led to increased risks of greenwashing and investor confusion.
In response, the Commission has proposed simplified disclosures and a new product categorisation system in the amending regulation. The proposal also encompasses amendments relating to key information documents for packaged retail and insurance-based investment products (“PRIIPs”).
The proposal forms part of the Commission’s competitiveness, burden reduction and simplification agenda. Negotiations are expected to focus on the impetus for simplification to boost European competitiveness, weighed against the pursuit of the EU’s ambitious climate-related targets. The tension between regulatory efficiency and the EU’s sustainability ambitions is likely to play a defining role as the initiative enters trilogue negotiations in Q4 2026.
What does this mean for your business?
The precise criteria applicable to each of the new product categories under the revised SFDR will not be finalised until a political compromise is agreed by the EU legislators. At that stage, managers should map their existing product ranges against the new framework to identify how to classify all products and to determine the applicable product disclosures.
As with the existing SFDR framework, key technical detail on disclosure templates, categorisation criteria, and supervisory expectations is likely to be developed through regulatory technical standards and guidelines from the European Supervisory Authorities. The timeline and content of that Level 2 work will be critical for compliance planning.
At a glance: review of the Sustainable Finance Disclosure Regulation
| What it is | A legislative proposal to revise the Sustainable Finance Disclosure Regulation, the EU’s transparency framework for financial products integrating environmental or social aims. The European Commission has put forward simplified disclosures and a new categorisation system in the proposed amending regulation, responding to widespread criticism that the disclosures introduced under the original framework are too long, too complex, and impose unnecessary compliance burdens and costs. The proposal would also introduce changes to the key information document for packaged retail and insurance-based investment products. |
| The legal instruments | A regulation amending SFDR and key information documents for packaged retail and insurance-based investment products procedure reference 2025/0361 (COD). |
| Common name | “SFDR Review” / “SFDR 2.0” |
| Who it targets | Financial market participants, including insurers, investment firms, asset managers, pension providers and credit institutions providing portfolio management. |
| Proposal date | European Commission proposal published 19 November 2025. |
| Current stage | On 10 September, the European Parliament’s Economic and Monetary Affairs Committee approved its negotiating mandate on the SFDR Review. The negotiating mandate is expected to be confirmed at Parliament’s next plenary session (expected week commencing 5 October), and trilogue negotiations with the Council can then begin. The Irish Presidency of the Council is aiming to secure a final political agreement on the SFDR review by the end of 2026. |
| Key institutional lead | Commissioner Maria Luís Albuquerque (EPP / Portugal) |
| Key Matheson Contacts | Tara Doyle and Brónagh Maher |
Who is impacted by the review of the SFDR?
The SFDR is of relevance to managers and providers of financial products and the investors in those products. More specifically, the following categories of market participant are directly affected:
- Financial market participants – including alternative investment fund managers (“AIFMs“), UCITS management companies, pension fund managers, insurance undertakings offering insurance-based investment products (“IBIPs“), and other entities that manufacture or manage financial products that fall within the scope of SFDR. These entities are subject to both entity-level and product-level disclosure obligations under the existing framework, and will need to assess the impact of the revised framework on their existing product structures, disclosure documents and marketing materials.
- Financial advisers – including investment advisers and insurance distributors that advise retail and professional clients on financial products within the scope of SFDR, and who are subject to entity-level disclosure obligations regarding the integration of sustainability risks in the advice they provide.
- Retail investors – who rely on disclosures to assist them in making informed investment decisions. The proposed simplification of disclosures in the amending regulation is intended to address the current criticism that disclosures are too long and complex. A more accessible and usable disclosure framework is intended to enable retail investors to make better-informed decisions about the sustainability characteristics of financial products.
- Institutional and professional investors – who rely on SFDR disclosures in their own due diligence, stewardship and investment decision-making processes, including in the context of their own downstream reporting obligations (for example under the Corporate Sustainability Reporting Directive (“CSRD“)).
- National competent authorities (“NCAs”) – responsible for supervision and enforcement of the revised SFDR framework across Member States.
Entities subject to SFDR obligations have a direct commercial and compliance interest in the outcome of the legislative negotiations, particularly regarding the design of the new categorisation system and the scope and format of the product-level disclosures.
What are the key legal and political challenges?
Designing a workable categorisation system is a significant technical challenge. The replacement of the Article 8 / Article 9 disclosure framework with a new categorisation system raises complex design questions: how product categories are defined and bounded, what minimum criteria apply to each category, how categories relate to the EU Taxonomy, and how they interact with anti-greenwashing obligations. These are not merely technical questions; the calibration of category criteria will have direct commercial implications for the sustainability positioning of fund ranges across the EU asset management industry.
Interaction with other legislative files creates complexity. The proposal encompasses amendments to both SFDR and PRIIPs. The interaction between the PRIIPs-related changes in this proposal and those in the Retail Investment Strategy should be considered by the legislators to avoid inconsistent or overlapping requirements. More broadly, the SFDR framework sits at the heart of the EU sustainable finance legislative architecture, and any changes to it have downstream effects on firms’ compliance with adjacent frameworks including the CSRD, the Taxonomy Regulation, and sectoral legislation.
Enforcement and supervisory convergence across Member States. The existing SFDR has been criticised for inconsistent supervision and enforcement across national competent authorities, which has contributed to divergent market practices. The revised framework will need to be accompanied by robust supervisory guidance and convergent enforcement if it is to deliver the investor clarity it aims to deliver.
Frequently Asked Questions
The proposals would remove existing entity-level disclosures, with the new requirements applicable at product-level only.
The amending regulation would provide for three new product categories: (a) ESG Basics (similar to current Article 8 SFDR funds); (b) Sustainable funds (similar to current Article 9 SFDR funds); and (c) Transition funds.
The precise criteria applicable to each product category have evolved throughout the negotiations in Council and Parliament and there may be further refinements during the trilogue negotiations. The current requirement that investments should do no significant harm to certain environmental and social objectives, which had caused practical issues for Article 9 SFDR funds, has been removed from the text.
- 20 November 2025: The European Commission published its legislative proposal to revise the SFDR and to amend the PRIIPs Regulation in relation to key information documents for PRIIPs.
- 9 December 2025: In the Council, technical-level work began in the Working Party on Financial Services and Banking Union – Sustainable Finance.
- 29 January 2026: The European Parliament allocated the proposal to ECON.
- 28 April 2026: The Economic and Monetary Affairs Committee (“ECON”) published its draft report.
- 6 June 2026: Amendments tabled in committee.
- From 1 July 2026: Minister Simon Harris took over responsibility for the file on behalf of the Irish Council Presidency.
- 10 September 2026: The European Parliament’s Economic and Monetary Affairs Committee approved its negotiating mandate on the SFDR Review. The negotiating mandate is expected to be confirmed at Parliament’s next plenary session (week commencing 5 October), and trilogue negotiations with the Council can then begin.
- Timeline for full legislative progress: Legislators are aiming to reach agreement in the trilogue negotiations by the end of 2026. The draft regulation is stated to apply 18 months after its entry into force. The earliest expected date of application, based upon publication in the Official Journal of the EU in Q1 2027, would therefore be Q3 2028.
Council:
- From July 2026, Minister Simon Harris has taken over responsibility on behalf of the Irish Presidency. As the Irish Council Presidency covers the period July to December 2026, Minister Harris oversees the file during a potentially significant phase of Council-side deliberations.
European Commission:
- Commissioner Maria Luís Albuquerque (EPP / Portugal) is responsible for progressing this file. Commissioner Albuquerque, who holds the portfolio for Financial Services and the Savings and Investments Union, is the key Commission-side interlocutor for industry and institutional stakeholders on this file.
European Parliament:
- ECON Committee – lead committee in the European Parliament
- Gerben-Jan Gerbrandy (Renew Europe, Netherlands) – leading work on behalf of the ECON Committee as rapporteur
The Commission’s proposed amendments to the SFDR framework are intended to simplify the requirements and to address concerns that the use of the framework as a labelling regime rather than a disclosure framework could in fact increase the risks of greenwashing rather than mitigating those risks.
| What the Commission is trying to achieve | What this might look like in practice |
| Simplify disclosure requirements to reduce unnecessary burdens and costs | Simplified disclosure templates replacing the current lengthy and complex product-level and entity-level disclosure templates, with the aim of reducing compliance costs for financial market participants |
| Introduce a clearer categorisation system for sustainable financial products | A new product categorisation system intended to provide clearer and more meaningful sustainability labels for investors to replace the existing regime whereby financial products are subject to the requirements of either Article 8 or Article 9 SFDR, depending upon their sustainability ambitions. |
| Boost European competitiveness through regulatory simplification | Reducing regulatory friction for EU-financial market participants competing globally, as part of the Commission’s broader competitiveness agenda |
| Improve investor usability and combat greenwashing | Making disclosures more accessible and comparable for retail and professional investors, reducing scope for misleading sustainability claims |
| Amend key information document requirements for PRIIPs | Revised PRIIPs key information document requirements aligned with the updated SFDR categorisation and disclosure framework |
| Address the EU’s sustainable finance and climate ambitions | Balancing simplification with the EU’s climate-related regulatory targets, ensuring the revised framework continues to support capital allocation towards sustainable activities |
The SFDR Review does not operate in isolation. It sits at the intersection of two major Commission policy agendas: the EU’s sustainable finance framework (which flows from the European Green Deal) and the competitiveness and capital markets agenda (which is reflected in the Savings and Investments Union, (“SIU“)).
The central political tension in this file reflects the challenge of reconciling the Commission’s dual ambitions: maintaining or strengthening the EU’s position as a global leader in sustainable finance regulation on the one hand, and making EU capital markets more competitive and attractive to investment on the other.
The SFDR review interacts directly with several other legislative files and regulatory frameworks that should be monitored in parallel:
- The Corporate Sustainability Reporting Directive (“CSRD”) and the European Sustainability Reporting Standards (“ESRS”): SFDR product-level disclosures rely substantially on sustainability data from investee companies. Any changes to the CSRD framework or the ESRS standards will affect the data inputs available to financial market participants for SFDR disclosures.
- The EU Taxonomy Regulation: The degree to which SFDR product categories reference Taxonomy-alignment metrics is a key design question in the revised categorisation system. Changes to Taxonomy usability and scope will directly affect the practical content of SFDR disclosures.
- The SIU: The SIU agenda, as the successor to the Capital Markets Union, aims to deepen EU capital markets and channel retail savings into productive investment. A clear and credible SFDR framework supports investor confidence in sustainable financial products, which is itself a precondition for the effective mobilisation of private capital into EU capital markets.
- The Retail Investment Strategy (“RIS”): The RIS amends the PRIIPs Regulation and multiple financial services Directives (MiFID, UCITS, AIFMD, IDD, Solvency II). The SFDR 2.0 proposal also encompasses amendments to PRIIPs , meaning that firms will need to assess the interaction between the two sets of PRIIPs-related changes carefully.
