SFDR 2.0, the European Commission’s proposal to revise the Sustainable Finance Disclosure Regulation published on 20 November 2025, deletes the Article 8 and 9 disclosure regimes and replaces them with three voluntary product categories, while reserving ESG claims in fund names and marketing for products that qualify. It’s a proposal rather than law, but if it survives negotiation broadly intact it will change how every ESG fund in the EU is classified, named, documented and reported.
Why is the Commission proposing SFDR 2.0?
The Commission’s own Q&A is candid about the reasons. It says disclosures are long, complex and hard to compare, and that the market has used Articles 8 and 9 as de facto labels, leading to concerns about greenwashing and mis-selling, while firms struggled with the length and cost of the rules.
The proposal is the outcome of the SFDR review announced in December 2022, the two consultations in 2023 and a call for evidence in spring 2025.
What are the three SFDR categories?
The proposal sets up three voluntary categories, each aimed at a different kind of sustainability claim:
- Sustainable: products contributing to sustainability goals, such as investments in companies or projects that already meet high sustainability standards.
- Transition: products investing in companies or projects that aren’t yet sustainable but are on a credible transition path.
- ESG basics: products that integrate ESG approaches, such as best in class or excluding the worst performers, without meeting the criteria for the other two.
Each category rests on two tests. At least 70% of the portfolio must follow a strategy that matches the product’s claim, and the product must also apply a set of exclusions.
All three categories exclude tobacco, prohibited weapons, companies violating human rights and companies with significant coal revenues. Transition also excludes companies expanding fossil fuel activities, while Sustainable goes further and excludes fossil fuels and high-emitting energy activities.
The proposal offers some shortcuts as well, so a product with 15% or more in Taxonomy-aligned assets is treated as meeting the 70% positive contribution test for Sustainable or Transition, although it still applies the exclusions to the rest of the portfolio. Products tracking, or managed by reference to, an EU Paris-aligned Benchmark qualify as Sustainable, and those using an EU Climate Transition Benchmark qualify as Transition, without separately checking the exclusions.
The proposal also deletes the SFDR definition of “sustainable investment”, which the Commission says gave rise to diverse interpretations.
What else changes for Article 8 and Article 9 funds?
Beyond the categories, the proposal makes several other changes:
- Names and marketing are reserved: only products meeting a category’s criteria could make ESG claims in their names and marketing documents, and the Commission says the criteria build on ESMA’s guidelines on fund names, which already apply.
- Entity-level PAI disclosures go: the website statement on principal adverse impacts (PAI), currently required of firms with more than 500 employees, is deleted along with its template. The Commission estimates this alone cuts annual disclosure costs for financial market participants by 25%, or €56 million a year.
- Product disclosures get shorter: there would be fewer topics, and templates for categorised products would be limited to two pages, with the detail to be set later in implementing rules.
- The KID gets a category heading: the PRIIPs Regulation would be amended so that a key information document (KID) states which category, if any, the product falls under, replacing the current general statement on environmental or social objectives.
- Advice falls out of scope: the recitals say SFDR should focus on firms that manufacture, manage or make products available, and that financial advisers giving investment advice don’t do any of those things.
What stays the same, for now
In law, nothing changes yet, because Articles 6, 8 and 9 and the templates in Delegated Regulation (EU) 2022/1288 remain the law until a revised regulation is agreed, adopted and applies.
The proposal says the new rules would apply 18 months after entry into force. With the Parliament and Council still to form their positions, and implementing rules to follow, application before 2028 looks unlikely, though no institution has said so.
When would SFDR 2.0 apply?
- 10 March 2021: SFDR starts to apply
- 1 January 2023: the Delegated Regulation templates become mandatory
- 2023: the Commission runs two consultations on the SFDR review
- 21 May 2025: ESMA’s fund names guidelines apply to existing funds
- 20 November 2025: the Commission publishes its SFDR proposal
- Next: the Parliament and Council form their positions and negotiate, with implementing rules and templates following agreement
- 18 months after entry into force: the revised rules would apply
What to do now
- Run a dry mapping exercise, testing each Article 8 and 9 fund against the three categories, the 70% test and the exclusions, and flagging any that fit nowhere.
- Check your fund names, because funds that won’t meet a category would lose ESG terms in their names and marketing, so it helps to start listing what that would touch.
- Keep your current templates in good order, since nothing changes in law yet and 2026 periodic reports and pre-contractual annexes still follow 2022/1288.
The proposal sets out what an ESG fund would have to be, rather than only what it has to disclose, in the form of a threshold, a list of exclusions and a short document. Meeting it is likely to mean reclassifying, renaming and re-documenting a good number of funds, although that work probably sits in 2027 or later rather than in the next quarter.
At Kurtosys we see a reclassification like this as a data problem first. When the same governed fund data feeds factsheets, KIDs, prospectus annexes, periodic reports and fund websites, a category change or a name change is one controlled update rather than a hunt through hundreds of files. If you’re starting to plan for SFDR 2.0, get in touch.
Sources: European Commission: Commission simplifies transparency rules for sustainable financial products, proposal COM(2025) 841, Commission Q&A on the revised SFDR, Commission press release, as at 1 December 2025.
About this article
This article reflects the position at 1 December 2025 and was checked against the primary sources available at that time. Thomas Bjerkén, our regulatory reporting and fund data specialist, joined Kurtosys after it was published and now looks after our regulatory content. SFDR has moved on since. For the latest position, see SFDR 2.0: the Council has its position, and it’s closer to the Commission than you might think.
