The legislative process of the SFDR 2.0 (the comprehensive reform of the Sustainable Finance Disclosure Regulation) is delayed. Following the revision proposal launched by the European Commission at the end of 2025 and the EU Council's approval of the negotiation mandate last June, all eyes are now on the European Parliament, whose groups are trying to find a compromise agreement to unblock the key points.
The main reason for the slowdown is the enormous volume of technical work. The rapporteur, Gerben-Jan Gerbrandy, presented his initial draft in the spring of 2026. However, other members of Parliament have submitted more than 600 amendments to the text. Reviewing, negotiating, and unifying these proposals into viable compromises has taken much longer than expected and has forced a delay in the voting schedule.
The initial roadmap anticipated that the crucial vote in the Committee on Economic and Monetary Affairs would take place in mid-July 2026. It is now estimated that the final vote and its subsequent ratification in the Plenary of the European Parliament will be pushed to early autumn.
With the official position of Parliament delayed, trilogue negotiations between the Commission, the Council, and Parliament are not expected to begin until late October or November 2026 (when they were originally expected in September).
The delay is not only bureaucratic but also political. There are deep discrepancies between what the Council (the member states) proposes and what is being debated in Parliament:
The product categories are in question: The Council advocates for three clear categories (Transition, ESG Basics, and Sustainable). However, there is debate in Parliament about the boundaries of these labels and whether the minimum criteria should be tightened to avoid greenwashing.
Principal Adverse Impact Indicators (PAI): While the Parliament draft seeks to make certain disclosures stricter, the Council has proposed flexibility and grace periods (for example, exemptions of up to 3 years to adapt transition portfolios).
Professional vs. retail investors: There is intense debate over whether funds aimed purely at institutional investors should have the same transparency obligations as those aimed at the general public.
The SFDR 2.0
The most important changes introduced by this "version 2.0" include:
1. The end of "Articles 8 and 9". In the original regulation, funds self-divided according to the article of the law they complied with: those under Article 8 (which "promoted" ESG/green light characteristics) and those under Article 9 (with specific sustainable objectives/dark green). As the law was not designed to be a labelling system, it created chaos in the market.
The SFDR 2.0 erases this model and creates three official and voluntary categories:
Transition Category (Transition): For funds that invest in sectors or companies that are not yet sustainable but are on a credible path of decarbonisation or improvement.
Sustainable Category (Sustainable): For investments in projects or companies that already meet the highest ESG standards or are aligned.
ESG Basics Category (ESG Basics): For financial products that simply integrate basic environmental or social factors into their strategy. with the EU green taxonomy.
For a fund to use any of these three labels (and promote itself as "green" or "sustainable"), the SFDR 2.0 requires a minimum threshold of 70% of the assets in its portfolio aligned with the category's objective. Additionally, it introduces the obligation to exclude harmful industries (such as certain fossil fuels or controversial weapons) across the entire portfolio.
If a fund in the Transition or Sustainable category also demonstrates that its investments generate a measurable and real positive impact in the world (for example, building a specific wind farm), it will be allowed to add an "extra" or topping of Impact Strategy, being able to legally use the word "Impact" in its commercial name.
The proposal removes some of the more cumbersome entity-level disclosure obligations, such as certain breakdowns of Principal Adverse Impact Indicators (PAI), as that information is already covered by other more recent laws such as the CSRD (Corporate Sustainability Reporting Directive). The aim is to make the information more digestible for the average investor.