Draft SFDR 2.0: change is on the horizon

A leaked draft of ''SFDR 2.0'' the European Commission's proposal for the revision of the Sustainable Finance Disclosure Regulation began circulating in the market on 6 November 2025.

It is widely expected that the European Commission will issue its formal publication of the proposals for the revision of the Sustainable Finance Disclosure Regulation (SFDR) on 19 November 2025. If the formal publication aligns with the leaked draft, it will see the most significant overhaul of the SFDR regime since its introduction.

In this article our Investment Funds team in Ireland outline an overview of the key points from the leaked draft of SFDR 2.0. Please note that some details may be subject to change once the European Commission formally publishes the proposals. Ogier expects to issue a further briefing on the finalised proposals once published.

Background

SFDR has applied since March 2021, with the objective of establishing a harmonised approach on sustainability-related disclosures provided to investors in the EU. Since its date of application, SFDR has had broad-reaching effects on the market.

The comprehensive assessment of SFDR undertaken by the European Commission since 2023 has identified several problems that have emerged since its entry into application. Against this background, the European Commission proposed to review SFDR to make it more efficient, simple and proportionate.

The objectives of SFDR 2.0 are to strengthen protection for end investors and to improve disclosures to them. While SFDR was a disclosure regime, it is evident from the draft leak of SFDR 2.0 that there is a clear move to a product categorisation regime, which we explore in further detail in this article.

Under the draft SFDR 2.0 each of the proposed new product categories would be subject to the following key conditions:

• a minimum investment commitment of 70%, which is linked to the proportion of investments to meet the objectives of the respective category

• products comply with the mandatory list of exclusions, which cross refer back to the exclusions for Climate Transition Benchmarks and Paris-Aligned Benchmarks 

• products comply with the list of permitted investment types in relation to each respective product category to give effect to the sustainability objectives

The newly proposed product categories under SFDR 2.0 are not direct successors to the existing ''Article 8'' and ''Article 9'' classifications and represent a shift in approach.

The names of the newly proposed product categories under SFDR 2.0 have not yet been finalised and will be specified in delegated acts to be adopted by the European Commission.

Pre-contractual, website and periodic disclosures

SFDR 2.0 maintains the established structure for mandatory pre-contractual, website and periodic disclosures for financial products falling within the ''Article 7, Article 8 and Article 9'' categories, namely sustainability related financial products.

For sustainability related financial products, financial market participants will be required to publish and maintain information on their websites, similar to the existing SFDR regime. However, the website disclosures may be simply in the form of a link to the pre-contractual and periodic disclosures.

For the pre-contractual and periodic disclosures, it is proposed that the new disclosure templates for sustainability related financial products will be much shorter than under the current SFDR and shall not exceed two pages.

Under SFDR 2.0 the European Commission is required to adopt a delegated act which shall specify additional details for the presentation of the information to be disclosed. The disclosures should allow end investors to understand the specific characteristics of each of the sustainability related financial products to compare them and understand where they fit their sustainability preferences.

Other products and exemptions

SFDR 2.0 provides that for alternative investment funds (AIFs) which are offered exclusively to professional investors, they may opt out of the regime.

For all other financial products, or where a financial product offered exclusively to professional investors opts into the regime, the requirements on the integration of sustainability risks (in accordance with Article 6 and Article 3) under the current SFDR regime will continue to apply in full and effectively remain unchanged.

Principal Adverse Impact (PAI)

The Principal Adverse Impact regime has been seen by many entities that were subject to it as a costly and burdensome process with little perceived benefit to investors. It proposed to remove the PAI regime in its entirety at both the level of asset managers (that is at the entity level) and the product level. If the proposals under SFDR 2.0 are adopted, PAI disclosures will no longer be required to be made by entities nor will they be required to publish ''comply or explain'' statements.

Grandfathering period

There does not appear to be any grandfathering period, meaning that the revised framework would apply with effect from the date SFDR 2.0 enters into force.

Next steps 

Once the formal proposal is published, it will be submitted by the European Commission to the European Council and the European Parliament and will need to pass the EU's legislative process before it takes effect.

While no immediate action is required, firms may wish to begin considering the potential implications of SFDR 2.0. For further information or if you would like to discuss, contact the Ogier Investment Funds team via their contact details below.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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