Travers Smith's Sustainability Insights: SFDR 2.0 – the mist clears

Nearly a year ago, the European Commission published its proposal for a revamped sustainable finance disclosure framework, known as SFDR 2.0. The Council of the EU agreed its negotiating position in June 2026. Since then, progress has been slow. The European Parliament's discussions were interrupted by the summer recess but have now been completed. Earlier this month, the Parliament's Economic and Monetary Affairs Committee — ECON — finally published its own position. Assuming the Parliament endorses it next month, formal negotiations between the three institutions can then begin. On the current timetable, SFDR 2.0 is unlikely to apply before H1 2029 at the earliest.

Though recent experience has taught us that no legislation is final until the moment it is actually published, core elements of SFDR appear to be agreed. All three institutions agree on a product categorisation regime built around three distinct categories: "Transition", "ESG Basics" and "Sustainable". Each carries detailed rules on eligible investments and exclusions, and products must allocate at least 70% of their portfolio accordingly. ECON's lead MEP heralded the committee's position as a "broad compromise" that would give investors certainty their money was "actually contributing to a greener economy". But does it really improve on what the Commission and the Council proposed? The answer is mixed, and in some respects, industry might feel that the Parliament has moved in the wrong direction.