SFDR 2.0: What is changing and why you should act now
At the end of 2025, the European Commission presented its long-awaited proposal to reform the Sustainable Finance Disclosure Regulation (SFDR). For fund managers and their investors, this means a fundamentally new playing field with greater clarity and also new requirements.
On November 20, 2025, the European Commission published its proposal to revise the SFDR. What initially appeared to be a technical adjustment reveals itself, upon closer inspection, to be a structural restart of the EU’s sustainability regime for financial products. The previous system of Articles 6, 8, and 9 will be completely replaced by a genuine categorization system with substantive minimum standards.
The need for action had long been clear. Since 2021, Articles 8 and 9 of the SFDR had effectively evolved into sustainability labels without consistent criteria. Accusations of greenwashing increased. PAI disclosures became an administrative burden. And investors rightly asked: what does an “Article 8” fund actually tell me?
The new categorization system
The core of the reform is the introduction of three main categories, along with an additional mixed category. Each comes with binding minimum investment thresholds, exclusion lists, and clearly defined investment strategies.
| Category | Designation | Core requirement | PAI mandatory? |
| Art. 7 new – Transition | Transition category | 70% in companies on a credible transition pathway | Yes |
| Art. 8 new – ESG Basics | ESG Basics | 70% with systematic ESG integration | No |
| Art. 9 new – Sustainable | Sustainable category | 70% with measurable sustainability objective | Yes |
| Art. 9a new – Mixed | Mixed | Combination of different strategies; relevant for fund-of-funds | Depending on sub-category |
Note: The 70% threshold for Art. 7 and Art. 9 is also considered met if at least 15% of investments are taxonomy-aligned.
What improves and what remains challenging
The reform is not an outright win for everyone, but it brings more structure to a system that has suffered from its own ambiguity. A direct comparison:
Opportunities of the reform
- No more PAI disclosure at company level—significant relief for fund managers
- Clearer product categories structurally reduce greenwashing risk
- Greater investor acceptance due to clear standards
- Leaner disclosure templates (max. 2 pages)
- Impact investing receives regulatory recognition for the first time
- More flexibility regarding PAIs at product level
Challenges & risks
- Higher substantive requirements for new Art. 7 and Art. 9
- No opt-out for PAIs for Transition and Sustainable funds
- Gap analysis for existing Article 8 funds becomes mandatory
- Detailed rules (Level 2) still pending—planning uncertainty remains
- Increased risk of green hushing
Assessment: Existing Article 8 funds and the new Article 7 are not directly comparable. Anyone currently managing a “light green” fund must assess which new category is realistically achievable. This requires a systematic gap analysis.
The green hushing paradox
The reform solves one problem but may create another. So far, many fund managers have over-communicated their ESG activities to achieve or justify Article 8 or Article 9 classification. In the future, the opposite may occur: Those who cannot or do not want to meet the stricter requirements of new Art. 7 or Art. 9 will remain in the uncategorized zone (new Art. 6) and will only be allowed to make very limited sustainability claims.
The consequence: fund managers with genuine but not fully formalized ESG processes may deliberately refrain from categorization and remain silent externally about their sustainability efforts. Green hushing, the withholding of sustainability progress due to regulatory concerns, has so far mainly affected listed companies. With SFDR 2.0, it could reach the fund market.
“Those who do not structure their ESG processes will not only lose the label, but the ability to talk about them at all.”
When will the reform take effect and what does it mean for you?
- November 2025
- Publication of the Commission proposal – the starting point of the reform
- 2026 – 2027
- Trilog negotiations between Commission, Parliament, and Council. The basic architecture is expected to remain stable; details will be negotiated (in parallel: development of Level 2 implementing measures)
- Approx. 2027
- Expected entry into force, followed by an 18-month transition period
- End of 2027 / early 2028
- Realistic start of practical application requirements for new funds. Exceptions apply to closed-end legacy funds no longer in distribution
Critical note: Fundraising processes require at least 12 months of lead time. Anyone starting to plan a new fund today is already operating within the application horizon of the new rules. The question is not whether, but when you will need to address SFDR 2.0.
Why you should act now
The temptation is understandable: as long as trilog negotiations are ongoing and Level 2 rules are still missing, the topic can be postponed. This logic is misleading, for three reasons:
First: The core architecture of the reform is already set. Whether Art. 7 “Transition” or Art. 8 “ESG Basics,” the categorization logic, the 70% threshold, and binding exclusions are defined. Anyone currently discussing a new fund strategy with investors should already factor in these elements.
Second: Data processes take time. Those who must report PAIs at product level in the future (new Art. 7 and Art. 9) need the corresponding data systems and portfolio metrics. This infrastructure cannot be built in a few weeks.
Third: Investors are already asking the questions. Institutional LPs focus on what is coming, not just what is currently in force. Anyone unable to present at least a preliminary mapping of their strategy to the new categories in investor discussions risks losing trust.
Where we are particularly in demand as consultants
The reform creates exactly the type of challenges where structured external support makes a difference: complex requirements, incomplete detailed regulation, short operational lead times, and significant investor communication needs.
Specifically, we support with:
- Gap analysis of existing funds: whether and how reclassification into new categories makes sense
- Product strategy for new funds: which category aligns with your investment strategy and investor base
- LP reporting and investor communication: concrete answers to SFDR-related questions from existing investors
- Documentation and disclosure processes: ensuring your systems are ready when new templates become mandatory
Ready for SFDR 2.0?
Talk to us for an initial assessment of your product strategies in light of the reform. No lengthy preparation required, a straightforward conversation is enough to get started.
