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The European Commission launched, during May, a consultation regarding the revision of SFDR, in order to gather once again opinions from various stakeholders - financial institutions, NGOs, and regulators - concerning this overhaul, scheduled to be announced at the end of 2025. This regulatory update would focus particularly on simplifying disclosure requirements and creating a new categorisation of financial products, which would replace the Articles 6, 8, and 9 currently in use.
To understand the position of market players regarding these future regulatory developments, we conducted an analysis of the main trends emerging from their contributions:
Several NGOs (UN PRI & IDF) and asset management companies support the idea of expanding SFDR's scope to all financial products, including unlisted funds, structured products, or insurance products such as euro funds, in order to increase available sustainability information. Other players are concerned about the feasibility of applying common criteria to very different asset classes.
🔍 A large proportion of respondents to this consultation call on the European Commission to conduct tests before deciding on criteria for each category. In the context of extending SFDR's scope to all products, actors like the IFD (the French Sustainable Finance Institute) also encourage the European Commission to consider different criteria according to asset classes.
Financial regulators like HANFA (Croatia), AFM (Netherlands), BaFin (Germany), and FMA (Austria) enhance only 2 categories —"sustainable" and "transition"— to avoid falling back into the pitfalls of the current SFDR by adding an "ESG Focus" category. This initiative is also supported by French financial institutions.
The AMF, as well as other French financial actors, support the addition of 3 categories to adapt to various ESG ambitions.
📌 Alignment with SDR: British actors, particularly asset management companies and NGOs, support the implementation of a categorisation system similar to SDR to facilitate harmonisation with the United Kingdom.
All respondents to the consultation invite the European Commission to more broadly integrate SFDR 2.0 into the sustainable finance regulatory landscape. Among the key measures we identify:
The revision of MIFID II and DDA regulations to adapt the questions asked to investors to the new categories.
The integration of ESMA's directive on fund names into SFDR categories. The "Sustainable" and "Transition" categories should thus comply with PAB and CTB exclusions specific to the ESG terms used.
Taking into account impacts related to the Omnibus directive, particularly the drastic reduction of data points (ESRS), which would ultimately not be communicated by non-financial companies.
📌 The FSA Norway regulator promotes the idea of removing the obligation to consider sustainability risks, as this obligation already exists in other regulations such as the UCITS Directive 2009/65/EC and Directive 2011/61/EU (AIFMD). This measure could reduce the administrative burden and the double reporting effect.
📌 British and French actors also propose integrating national labels into this revision to build on initiatives that already impose ESG criteria.
There is a global consensus among NGOs, financial actors, and regulators on a precise and standardised definition of the concept of sustainable investment to limit the risk of greenwashing and facilitate comparison between funds. This definition could also draw inspiration from existing regulations such as the European Taxonomy.
🔍 Some financial actors and regulators (e.g. Central Bank of Ireland) also propose clarifying the definition of transition activities to more easily classify investments in the different categories.
Many financial actors, supported by the CSSF, Luxembourg’s regulator, call for the simplification of templates and reporting obligations:
📌 Some French and Italian actors advocate for the implementation of a two-level reporting model. The first level would apply to all funds, establishing a generalised obligation to publish ESG information, including those currently classified as Article 6. The second level would correspond to in-depth reporting, specifically intended for funds integrating responsible investment objectives.
Interview with Florent Deixonne, Head of ESG Regulatory Strategy at Amundi
Since 2022, Florent Deixonne has been leading AMUNDI's ESG regulatory strategy, managing more than 2 trillion euros in assets globally. Contacted following his response to the European Commission's consultation on the overhaul of SFDR regulation, he provides below an overview of the market’s debates and reflections to make this regulation more effective.
At the European level, there seems to be a debate between defining future SFDR product categories as "voluntary" versus "mandatory". What is your opinion on this?
The European sustainable finance action plan, partly embodied by the implementation of SFDR, has profoundly changed the European sustainable funds landscape, in a positive way. However, SFDR has not fully met initial expectations. While SFDR aimed to clearly segment the fund universe, the market remains dominated by Article 8 funds, whose insufficiently precise definition generates both confusion for end investors about what a sustainable product is and therefore a risk of perceived greenwashing. Furthermore, since SFDR does not take into account the crucial issue of transition, it fails to support the redirection of capital flows towards this objective.
With the overhaul of SFDR 2.0, the focus is placed on establishing clear and comprehensible product categories, a necessary step for the retail end client, who must finally be placed back at the heart of considerations.
"Voluntary" categories suggest a concept of "labels", which sends the wrong message, as this does not reflect actual market demand. The real debate, however, centres on whether funds that do not meet the criteria of a product category should still be permitted to reference ESG in their regulatory documentation.
The answer is yes, funds should be allowed to integrate ESG elements in their documentation, but under certain conditions, that is, in a limited and proportional manner, aimed at ensuring adequate transparency without risk of greenwashing.
Categorised products would have no limits, particularly the use of ESG terms in fund names as well as in commercial documentation.
Do you believe that replacing the definition of sustainable investment with alignment to the Taxonomy is a good initiative? In your view, could further standardisation risk hindering certain financial institutions in their sustainable finance strategies, or slowing innovation in the sector?
The main objective of SFDR must be to design truly investable products and create relevant categories for investors.
Even if the taxonomy is a powerful tool, it does not, as it stands, allow for defining product categories. It reflects an economy that is still largely unsustainable: very few issuers are currently aligned with its criteria. Imposing high taxonomy alignment thresholds to qualify a fund as "sustainable" would risk producing either very "niche" funds with limited appeal, or poorly diversified funds exposed to significant sectoral distortions, synonymous with particular risk profiles.
The taxonomy therefore does not currently constitute an appropriate framework for defining sustainable investment on its own or for structuring product categories. While the concept of sustainable investment remains open to criticism, particularly as it does not enable clear comparisons between financial institutions, it is nonetheless widely used across the industry.
Specifically for the "Sustainable" category, it could therefore be relevant (i) to reuse this concept of sustainable investment while imposing more transparency on methodologies, (ii) for those who wish (= voluntary), to use a taxonomy approach, given the existence of this reference framework.
“Integrating national labels such as the ISR label into this revision in order to build on initiatives that already impose ESG criteria”. What’s your view on this? Do you consider that this could bring credibility to the new SFDR 2.0 categories and facilitate their adoption?
National labels have the merit of existing: they benefit from the trust of Retail clients, and are widely used by them. It is therefore essential to value them in the construction of future categories, particularly by considering the automatic recognition of the labelled funds’ compliance. For example, ISR-labelled funds could be integrated into the ESG Focus category, while those based on PAB or CTB benchmark indices could fall under the Transition category. The objective is not to have labels alongside product categories, but to guarantee, for labelled funds, automatic entry into one of these categories.
For the transition category, should strict criteria based on transition plans be imposed to ensure harmonisation between financial institutions, or should a more open approach be adopted?
The right balance must be found between robust criteria and investability. A "Transition" category based exclusively on the taxonomy or limited to perfect transition plans would result in a very pure portfolio, but unsuitable for addressing the real challenges of transition because the chosen issuers will already be green or will have already largely begun their transition (already net-zero). Such a product would become niche, with limited reach.
The Transition category must also be able to include all issuers committed to a transition trajectory (the "Improvers", "Transitioners"), whether through an effective reduction of their emissions and/or through the definition of ambitious objectives, meeting robust and predefined criteria without necessarily already being Net-Zero. Conversely, it must exclude issuers showing neither the will nor the capacity to evolve towards a more sustainable model. The whole challenge of this transition category is then to identify these different types of actors.
It is therefore necessary to define a restricted list of criteria, building on both existing regulations, such as alignment with PAB or CTB indices, or the European taxonomy, and on certain recognised market initiatives, such as Net-Zero frameworks.
The Portuguese NGO Better Finance proposes making systematic engagement mandatory as soon as the fund belongs to the sustainable or transition categories. According to you, is this a good or bad idea?
Engagement is an essential lever for evolving practices and should be mandatory for the "Transition" fund category. This approach would enable the identification and support of companies in the improvement phase ("Improvers" or "Transitioners"), thus facilitating their progression towards a more sustainable economic model. But it is a very time-consuming tool that requires significant human and financial resources. If we wish to make it a mandatory condition, it is crucial to precisely define its scope. Engagement should thus focus primarily on issuers with a strong climate impact.
However, it is not necessary to make it a mandatory requirement for the "Sustainable" category. It would be more relevant to align with good market practices and approaches already implemented by actors convinced of the added value of engagement. The latter generally conduct these actions at the asset management company level, in a global and coherent logic.
In your response to the consultation, you highlight the reporting obligation for all funds, both ESG and non-ESG: on what sustainability-related information should they all report according to you?
The overhaul of SFDR must lead to a radical simplification, while avoiding the "black box" effect. All funds should be subject to a common base of transparency requirements, including, in particular, the publication of certain PAI indicators and applied exclusions, to bring simplicity and comparability.
Categorised funds, meanwhile, must meet additional transparency requirements relating in particular to the criteria to which they have committed.
You emphasised the need to rethink SFDR and MIFID regulations to better meet the needs of retail investors, a position we fully share. In your view, how can we effectively reconcile the requirement for education and clarity towards retail investors with compliance with regulations imposing in-depth transparency and communication of complex sustainability information?
Today, the regulatory framework for sustainable finance has become extensive and ambitious, intended to enable clients to make informed decisions. However, in the absence of preliminary tests aimed at understanding and evaluating client needs, the initial objective cannot be achieved.
It is essential to place the Retail client back at the centre of regulatory discussions, which notably implies better understanding their preferences, being able to simplify the complexity of concepts, and strengthening extra-financial education. Moreover, today, clients are led to believe that sustainable investment carries no cost and that there are perfect products meeting all expectations, which is illusory. Better education about the advantages, limitations, and trade-offs inherent to sustainable investment is therefore essential. For example, excluding entire sectors (e.g., oil and gas sector) can result in less portfolio diversification and therefore increased risk.
Both the regulation and the financial advisers implementing it must redouble their efforts to align their messaging and tools with the real needs of clients. In this regard, the review of SFDR 2.0 should go hand in hand with a revision of the MIFID regulation, and more particularly the sustainability preferences questionnaire, accompanied by client testing to better calibrate future mechanisms.
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