SFDR 2.0: a closer look at the European Commission’s published proposals

On 20 November 2025, the European Commission published its formal proposals for the revision of the Sustainable Finance Disclosure Regulation (SFDR), otherwise referred to as "SFDR 2.0".

In this article, our Investment Funds teams in Ireland and Luxembourg outline the key proposed changes and provides a comparison with the leaked draft of SFDR 2.0, which circulated in the market earlier this month. Read about the leaked draft in our briefing: Draft SFDR 2.0: change is on the horizon | Ogier

Background

SFDR has applied since March 2021 with the aim of providing a harmonised approach on sustainability-related disclosures for EU investors. The European Commission’s comprehensive review, has identified a number of shortcomings following its introduction, leading to this major overhaul.

The formal proposals published by the European Commission confirm a shift from a disclosure-based regime to a product categorisation regime, representing the most significant reform since SFDR’s inception.

Product categorisation regime

The most notable change proposed by SFDR 2.0 is the introduction of a product categorisation regime and three new product categories. The names of the proposed new product categories in the European Commission's formal publication differ from those in the leaked draft and are as follows:

Consistent with the proposals in the leaked draft, the formal publication provides that each of the new 'Article 7, Article 8 and Article 9' product categories (sustainability-related financial products) are subject to:

• a minimum investment commitment of 70%, which is linked to the proportion of investments to meet the objectives of the respective category
• a mandatory list of exclusions, which cross refer to the exclusions for Climate Transition Benchmarks and Paris-Aligned Benchmarks
• compliance with a list of permitted investment types in relation to each respective product category to give effect to the sustainability objectives

The proposed introductions of minimum investment commitments, mandatory exclusions and prescribed permitted investment types, particularly in relation to Article 8 funds, will significantly raise the threshold for attaining Article 8 status compared to the current regime.

Pre-contractual, website and periodic disclosures 

Aligned with the leaked draft, the formal publication proposes that, similar to the existing SFDR regime, financial market participants will be required to publish and maintain information on their websites. Such disclosures however may be in the form of a weblink to the pre-contractual and periodic disclosures.

Importantly, the proposals also include a considerable reduction in the product level disclosures, with the aim of making information more comparable and easier for investors to understand the sustainability features of financial products.

The new disclosure templates for sustainability-related financial products are expected to be significantly shorter than under the current SFDR, limited to a maximum of two pages. The specific content requirements and presentation format will be set out in delegated acts to be adopted by the European Commission.

Article 6

Consistent with the provisions of the leaked draft, under the formal publication the requirements on the integration of sustainability risks (in accordance with Article 6 and Article 3) in the current SFDR regime will continue to apply in full and effectively remain unchanged.

Principal Adverse Impact (PAI)

The formal publication proposes to remove the PAI regime in its entirety at the entity level (i.e., asset managers), though noting disclosures on PAI are retained at a product level. This is a welcome development as it has been seen by many entities that were subject to it as a costly and time intensive process.

Additional key changes

For the most part, the proposals in the formal publication align closely with the leaked draft, with no major surprises. Notably however, while the leaked draft of SFDR 2.0 had included an opt-out provision for alternative investment funds (AIFs) which are offered exclusively to professional investors, this is not provided for in the formal publication issued by the European Commission.

The table below sets out an overview of additional key changes, reflecting what has remained the same and what has been updated in the formal publication compared to the leaked draft we previously reported on:

Next steps

The formal publication of SFDR 2.0 will be submitted by the European Commission to the European Council and the European Parliament for deliberation. The new regime is expected to apply 18 months after its entry into force.

How Ogier can help

While no immediate action is required, given the proposed nature of the changes and overhaul of the regime, we expect firms will want to start considering the potential impact of SFDR 2.0 on their businesses and product ranges, including reviewing product categorisations, fund documentation and disclosures.

For further information or if you would like to discuss, please contact Ogier’s Investment Funds teams in Ireland or Luxembourg via their contact details below.