What is changing in SFDR in 2025?
In November 2025, the European Commission published a legislative proposal to amend the Sustainable Finance Disclosure Regulation (SFDR – Regulation (EU) 2019/2088). The proposal fundamentally restructures how sustainability-related financial products are regulated, disclosed, and marketed in the European Union.
Rather than expanding disclosure requirements, the reform reduces disclosure complexity and introduces a mandatory EU-wide product categorisation system. The proposal also repeals the current SFDR Level 2 Regulatory Technical Standards and removes entity-level sustainability disclosures.
The objective is explicit: improve investor protection, reduce greenwashing, and restore comparability across EU financial markets.
Why did the EU decide to reform SFDR?
The Commission’s assessment of SFDR implementation identified several structural failures:
- Articles 8 and 9 were widely used as product labels, despite being disclosure provisions
- Sustainability disclosures became too complex and data-heavy to support investor decisions
- ESG data availability and quality were insufficient to support prescriptive indicators
- Supervisory interpretation diverged across Member States
- Compliance costs were disproportionately high, especially for SMEs
Although SFDR-covered products now represent nearly half of EU assets under management, the framework did not deliver the intended level of clarity, comparability, or investor confidence.
What happens to Article 8 and Article 9 under the new SFDR?
Articles 8 and 9 are no longer treated as disclosure-only provisions. Under the revised framework, they become formal product categories within a structured sustainability classification system.
The reform introduces three categories:
Sustainable products (new Article 9)
Products that invest in assets, activities, or projects that are already sustainable or pursue a defined environmental or social objective.
Transition products (new Article 7)
Products that support credible transition pathways, such as:
- Paris-aligned or climate transition benchmarks
- science-based targets
- capital expenditure aligned with transition plans
ESG basics products (new Article 8)
Products that integrate ESG factors beyond sustainability risk management, without claiming a sustainability or transition objective.
At least 70% of investments must be aligned with the product’s stated category.
What disclosures are removed under the SFDR reform?
The proposal eliminates entity-level SFDR disclosures, including:
- principal adverse impact (PAI) statements
- sustainability-linked remuneration disclosures
These requirements are removed to avoid duplication with CSRD and to reduce compliance burden. The Commission estimates that this change alone removes approximately 25% of recurring SFDR costs, with the greatest impact on smaller financial market participants.
What happens to SFDR RTS and templates?
Commission Delegated Regulation (EU) 2022/1288 is fully repealed.
The current model — based on detailed templates, indicator lists, and DNSH mechanics — is replaced by:
- category-driven disclosures
- simplified, principle-based requirements
- future delegated acts focused on clarity rather than exhaustiveness
This represents a shift from form-driven compliance to substance-driven product design.
How are sustainability claims and product names regulated?
Only products that qualify under one of the three SFDR categories may:
- use sustainability-related terms in product names
- make prominent ESG or sustainability claims in marketing materials
Non-categorised products may reference sustainability factors only as ancillary information and may not present them as defining features. This change directly targets greenwashing and aligns SFDR with EU consumer protection law.
How does the new SFDR align with other EU regulations?
The revised SFDR is explicitly aligned with:
- the EU Taxonomy Regulation
- CSRD and the Omnibus simplification package
- ESMA guidelines on fund names
- MiFID II and IDD sustainability preference rules
Taxonomy disclosures are no longer automatic; they apply only where a product chooses to reference Taxonomy alignment.
What does SFDR 2025 mean for asset managers and funds?
The core compliance question changes from:
“Which SFDR templates must we complete?”
to:
“What sustainability claim does this product make, and can it be substantiated consistently across strategy, data, disclosures, and marketing?”
This requires:
- explicit product categorisation logic
- clear investment strategy alignment
- robust ESG data governance
- audit-ready disclosure chains
How to operationalise SFDR after 2025
Implementing the revised SFDR framework is not a documentation exercise. It requires systems that can:
- separate entity-level and product-level logic
- map investments to sustainability and transition criteria
- maintain consistency across disclosures, KPIs, and marketing
- support supervisory scrutiny and audits
At Generation Impact Global, we explain in detail how SFDR Articles 6, 7, 8, and 9 translate into practical system architecture, data models, and governance workflows — including how to operationalise the new categorisation regime across portfolios.
👉 Detailed guidance is available here: SFDR | Generation Impact Global
