After years of deliberations, reports, and debate, the SFDR is set to be revised this year. Details of the European Commission’s planned amendments leaked in November of 2025. Recently, MEP Gerben-Jan Gerbrandy issued a new report outlining further changes to the law. These new amendments keep many of the proposed changes from the November draft, while altering key areas. Sustainable Investment Forum writes of the proposal:
“[the proposal includes] more detailed criteria for the ‘ESG basics’ category, which now require the removal of 20% of investments with the lowest sustainability-related rating or value. The removal of the ‘safe harbour’ provision for products tracking Paris-Aligned or Climate Transition Benchmarks is another positive change, intended to ensure a level playing field between categorised products.
Product-level disclosure of Principal Adverse Impact (PAI) indicators is also strengthened. A limited set of PAI indicators, to be defined at technical level, is made mandatory across all three product categories, while additional PAI indicators that are material to a specific product must also be disclosed. Engagement disclosures are also strengthened, requiring a comply-or-explain approach for all SFDR categories. The draft report introduces a requirement for non-categorised products that disclose their integration of sustainability factors to include a disclaimer in precontractual documentation, periodic documents, or KID PRIIPs.”
The European Parliament is set to discuss these and other proposed amendments in June, with Parliament’s negotiating position expected to solidify in September. After that trilogues will be underway. The amendments may change substantially during the process. It’s worth noting that the EU has primarily focused on scaling back and simplifying sustainability legislation over the past several years. However, discussions around the SFDR primarily focus on increasing compliance obligations.
Our members can learn more about sustainable finance legislation here.
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