SFDR review: new product categories under negotiation

The Sustainable Finance Disclosure Regulation (SFDR) (external site), Regulation (EU) 2019/2088, sets what asset managers, insurers, banks and investment firms disclose about sustainability, for the firm and for each product. The proposed review sets three product categories in place of the current concepts, so that investors can compare products more easily (Council of the EU (external site)).

The review is a proposal under negotiation. Its text can still change, and it has no application date (European Parliament (external site)).

Under the current regulation, products disclose either environmental or social characteristics (Article 8) or a sustainable investment objective (Article 9) (EUR-Lex (external site)). The Council describes these concepts as having led to greenwashing, meaning sustainability claims that overstate a product's profile (Council of the EU (external site)).

In the Council position, the categories are sustainable, for products that already reach high standards; transition, for products on a credible path; and ESG basics, for products using environmental, social and governance (ESG) approaches without fitting the other two (Council of the EU (external site)).

Products in the sustainable and transition categories use at least three indicators from a Commission list to disclose principal adverse impacts (PAI), the main negative effects of investments on sustainability factors (Council of the EU (external site)).

Under the Council text, a fossil fuel company can count towards the transition category if 20 percent of its capital expenditure goes to activities aligned with the EU taxonomy and it has a time-bound emissions reduction strategy. Alternative investment funds offered only to professional investors are outside the categorisation rules (Council of the EU (external site)).

Asset managers, investment firms, insurers and banks that make or distribute financial products are concerned; the final scope depends on the adopted text (Council of the EU (external site)).

An ESG Investment Analyst and a Portfolio Analyst test holdings against the category criteria and the required indicators (Council of the EU (external site)).

An Investment Product Specialist and a Client Reporting Analyst describe products by category instead of by article (Council of the EU (external site)).

A Compliance Officer reviews product names and documents against the greenwashing concern the categories address. A Fund Selection Analyst compares third-party funds by category once the rules apply (Council of the EU (external site)).

The Commission published its proposal on 20 November 2025 under the ordinary legislative procedure, file 2025/0361(COD). It also covers the key information documents for packaged retail and insurance-based investment products (PRIIPs) (European Parliament (external site)).

The Council agreed its negotiating position on 24 June 2026 (Council of the EU (external site)). In the European Parliament, the Economic and Monetary Affairs Committee (ECON) adopted its report on 10 September 2026, with a decision to open interinstitutional negotiations (European Parliament (external site)).

The next stage is a trilogue, a negotiation between the Parliament, the Council and the Commission. A final text then requires formal adoption by both co-legislators and publication in the Official Journal; no application date exists yet (European Parliament (external site)).

SFDR, adopted in 2019, introduced sustainability disclosures at the level of the firm and of each financial product (EUR-Lex (external site)). The Council text keeps two of its reference points, the principal adverse impacts indicators and the EU taxonomy (Council of the EU (external site)).

The proposal also changes when SFDR information is submitted to the European Single Access Point, the EU database of public disclosures (ESMA (external site)).