Fenion Insight: How SFDR 2.0 Will Reshape Sustainable Finance
Fenion has analysed the core elements of the European Commission’s proposal and highlights why SFDR 2.0 may bring greater clarity while also introducing new challenges for market participants.
The proposal introduces clearly defined product categories, significantly simplified disclosure requirements, and a stronger focus on preventing greenwashing.
The previous market practice of treating Article 8 and Article 9 as de‑facto sustainability labels is set to end. Instead, the Commission proposes binding categories – Transition Products (Article 7), ESG Integration (“ESG Basics”, Article 8), products with a measurable sustainability objective (Article 9), and an additional category for mixed products (Article 9a). Each category comes with minimum standards, including mandatory exclusions, in some cases strengthened by stricter fossil‑fuel rules.
At the same time, SFDR 2.0 aims to streamline disclosures:
Pre‑contractual documents will be shorter and more structured, website requirements will be reduced, and the PRIIPs KID will include a dedicated sustainability section. The Commission also plans a full revision of the Regulatory Technical Standards (RTS) with simpler templates to improve comparability and reduce complexity. Additionally, the proposal provides relief at entity level by removing the requirement for Principal Adverse Impact (PAI) disclosures and sustainability‑related remuneration disclosures.
What impact will SFDR 2.0 have on the market:
These changes will have tangible implications for asset managers and investors. The new categories and minimum standards shift the focus from broad ESG narratives to a clearer and more verifiable product logic. Since taxonomy disclosures will only be required when taxonomy‑aligned activities are relevant to the strategy, formal reporting pressure decreases – while expectations for consistency between product strategy, data systems, and SFDR category increase. Updates to the PRIIPs KID will help retail investors more easily identify whether a product qualifies under Article 7, 8, or 9.
For asset managers, this means:
Data and portfolio processes must more precisely track which holdings contribute to the 70% threshold, how exclusions are implemented, and how impact or transition objectives are measured. The European ESG Template (EET) is also expected to be revised – with new fields for classifications, exclusions, and PAI indicators – requiring adjustments in interfaces and data logic. For investors, the reform may result in greater transparency, provided methodical differences between products are properly understood.
Whether SFDR 2.0 ultimately achieves its goal of creating greater clarity will depend on the final form of the RTS.
Fenion will continue to monitor the developments closely and assess their implications for the market.
