The European Commission’s proposal to amend the Sustainable Finance Disclosure Regulation (SFDR 2.0) is an important step towards simplifying the framework while improving clarity for investors. Representing an industry managing over EUR 33 trillion in investment assets, EFAMA supports the introduction of clear product categories, simplified product-level disclosures, the removal of entity-level PAI reporting, and stronger alignment with MiFID/IDD sustainability preferences. However, certain technical choices will determine whether the new regime truly reduces complexity while preserving credibility.
Making simplification real
To deliver real burden reduction, requirements that are being discontinued, notably entity-level PAI reporting, should cease to apply as soon as the revised rules enter into force. Temporarily maintaining discontinued reporting obligations during the implementation phase would create avoidable operational costs without benefiting investors.
At the same time, any new rules should only apply once the necessary technical standards are available, with a realistic implementation timeline of at least 18 months. Avoiding repeated disclosure changes will be essential to maintaining investor trust and preventing unnecessary market disruption.
Supporting Europe’s transition — not restricting it
EFAMA has serious concerns about proposed minimum exclusion requirements that go beyond the existing EU regulatory baseline established by the ESMA Fund Naming Guidelines and the Climate Transition Benchmark (CTB) requirements. These additions create unnecessary regulatory fragmentation. For the ‘Transition’ category in particular, this risks excluding the carbon-intensive sectors where transition efforts are most critical. Analysis of the proposed exclusions suggests that approximately 90-95% of the global energy sector would be excluded from transition-categorised investment products, with up to 50-60% of emerging market utilities facing exclusions. We urge co-legislators to align minimum exclusion criteria fully with established EU baselines to ensure regulatory coherence, preserve portfolio diversification, and keep the framework credible and globally investable.
Recognising the role of sovereign bonds
Sovereign bonds are a cornerstone of diversified portfolios and a critical tool for government funding of climate and social investment. Excluding general-purpose sovereign bonds from the ‘Transition’ and ‘Sustainable’ categories would increase portfolio risk, reduce diversification and weaken the coherence of the framework. They should be eligible, subject to robust and transparent assessment methodologies.
Transparency tailored to the end user
Finally, EFAMA calls for balanced accountability across the sustainable finance ecosystem, including greater transparency expectations for ESG data providers. Products marketed exclusively to professional investors should benefit from an opt-out allowing disclosures tailored to sophisticated clients, without imposing retail-oriented categorisation constraints. Consumer testing of the implementing measures will also be essential to ensure sustainability information remains clear, comparable and understandable for retail investors.
Anyve Arakelijan, Senior Policy Advisor at EFAMA, commented:
SFDR 2.0 is a genuine opportunity to build a framework that works: for investors, for the market, and for Europe's climate objectives. But that opportunity will be wasted if the minimum exclusions for the Transition category go beyond what existing EU frameworks already require. Excluding carbon-intensive sectors from transition-categorised products does not accelerate decarbonisation, it simply creates a Transition category that finances the already-green rather than the actively-transitioning. Co-legislators must resist the temptation to make the framework look stricter on paper while making it less effective in practice.
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Notes to Editors
Access the European Commission’s SFDR 2.0 proposal here.
Find out more about our work on SFDR here.
For further information, please contact:
Hayley McEwen
Head of communications and membership development
