After months of debate over the Omnibus amendments and their sweeping implications for EU’s sustainable disclosure rules, attention is now turning to the Sustainable Finance Disclosure Regulation (SFDR). Often described as the backbone of Europe’s sustainable investment framework, SFDR is next in line for reform, with the European Commission’s formal review scheduled for 19 November.
Towards a clear, simple and reliable classification system
The planned review follows widespread recognition that SFDR’s current design has created complexity rather than clarity. A 2024 report from the Platform on Sustainable Finance, which is the official advisory body for the EU Commission on sustainable finance policies, called for a “clear, simple and reliable” classification system to help investors and consumers better understand what makes a financial product “sustainable”.
As an example, the Platform proposed replacing the current Article 8 and Article 9 disclosure structures with an actual classification scheme for financial products in form of three voluntary categories – “Sustainable, Transition, and Sustainability-Linked” products. At the same time, the Platform called for greater consistency across other regulatory frameworks such as CSRD (for PAI indicators) and the EU Taxonomy (for definitions of minimum safeguards and sustainable investments).
Leaked draft from the Commission
While the formal proposal has yet to be published, a leaked draft seen by Responsible Investor (6 November 2025) offers a possible preview of what’s to come. The leak suggests a structural overhaul of the SFDR framework consistent in spirit with the Platform’s recommendations, by moving toward simplification and clearer product categorization with a three-category model:
- Article 7 – Transition Funds: A new product category where at least 70% would be invested in assets with measurable transition objectives, such as taxonomy-eligible activities expected to align within five years, or companies with credible transition plans or science-based targets for climate and nature,
- Article 8 – Sustainability-Linked Funds: Products integrating sustainability factors (e.g. above-average ESG performance or proven positive track record on sustainability indicators).
- Article 9 – Sustainable Funds: Products with a sustainability objective, investing at least 70% in sustainable activities (taxonomy-aligned, Paris-aligned, or EU Green Bonds), and explicitly excluding companies expanding fossil fuel capacity or lacking coal phase-out plans.
“Sustainable investments” no more?
At a high level, the Commission’s leaked proposal broadly aligns with the Platform’s recommendations: both pursue a simpler, tiered framework that distinguishes sustainability ambition levels and ties financial products more closely to corporate reporting under CSRD. However, the leak also suggests that the Commission plans further revisions on at least two accounts:
- Delete the formal definition of “sustainable investment” for Article 9 products: Where the Platform advised the Commission to strengthen the definition of sustainable investments, e.g. by aligning with definitions used in the EU Taxonomy, the leak suggests that the Commission may slash the concept as a stand-alone definition. Instead, the concept would be embedded directly in the product category to overcome “uncertainty in aligning practices” with the current definition.
- Abolish entity-level Principal Adverse Impact (PAI) reporting, replacing it with a smaller set of product-level indicators focused on comparability and investor relevance. The Commission estimates this will save investors around €56 million per year.
What should fund managers expect?
The formal review of SFDR is set for 19 November, with legislative negotiations likely extending into 2026. At its best, the revision will deliver what SFDR was meant to achieve: a simpler, more credible framework for sustainable investment across Europe. However, like the concerns voiced by critics of the Omnibus, there is a risk that critical elements of the SFDR become further diluted or weakened.
For fund managers, the upcoming months is likely to bring a need for recalibration – revisiting ambitions, product design, data collection and use, and disclosures.
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Raison Consulting is an advisory company specialised in sustainable investments in private markets. We help investors, fund managers and portfolio companies across asset classes unlock their full impact potential while meeting the growing requirements to sustainable investments. Raison is based in Copenhagen and co-founded by Mette Dalgliesh Olsen and Peder Michael Anker Jørgensen with more than 35 years combined experience in driving sustainable transformations for both large, medium and small cap companies across sectors and geographies.