On 19 November 2025, the European Commission proposed a set of amendments to the Sustainable Finance Disclosure Regulation (SFDR), the EU’s transparency framework for financial products integrating environmental or social aims. The changes are designed to address current shortcomings by making the rules simpler, more efficient, and better aligned with market realities.
In application since March 2021, the SFDR helps investors seeking to put money into sustainable companies or projects make informed choices and assess how sustainability risks are integrated into financial products. However, in recent years it has become clear that the framework was not fully achieving its purpose: disclosures were often too long and complex, making them difficult for retail investors to understand and compare, while financial market participants experienced unnecessary burdens and costs. Moreover, the SFDR has effectively been used as a de facto labelling system, causing confusion among investors and increasing the risk of greenwashing and mis‑selling.
To address these issues and improve the framework, the Commission is proposing
- simplified disclosures: financial market participants (FMPs) are no longer required to disclose how at company level they consider principal adverse impact of investment decisions on sustainability factors. Consumer‑facing disclosures aimed at retail investors are also simplified, with fewer indicators and shorter templates
- introduction of a categorisation system with three categories: Based on extensive stakeholders’ feedback, the Commission is proposing three voluntary categories that build on existing market practices. The categories will simplify the investment journey of retail investors and help them to better match their sustainability preferences with the products on offer
The proposed categories will be
- sustainable category: products contributing to sustainability goals (e.g. climate, environment or social goals), such as investments in companies or projects that are already meeting high sustainability standards
- transition category: products channeling investments towards companies and/or projects that are not yet sustainable, but that are on a credible transition path, or investments that contribute toward improvements in e.g. climate, environment or social areas
- ESG basics category: other products that integrate a variety of ESG investment approaches but do not meet the criteria of the sustainable or transition investment categories
Categorised products would need to ensure that a high portion of investments (70% of the portfolio) supports the chosen sustainability strategy and that they exclude investments in harmful industries and activities. ESG claims in names and in marketing documentation will be reserved for categorised products – this is a key step to fight greenwashing and boost trust in sustainable investments.
The amended rules proposed will deliver simpler and more usable information for investors, helping them to make better informed choices. Providers of financial products will face fewer disclosure requirements, reducing compliance costs. Together, these changes will strengthen the EU’s leading role in sustainable finance and the competitiveness of its financial sector. They will also help encourage greater retail participation in EU capital markets, in line with the objectives of the savings and investments union (SIU), and help mobilise more funds towards sustainable objectives.
Related links
Legislative package to simplify transparency rules for sustainable financial products
Sustainability-related disclosure in the financial services sector
Savings and investments union
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