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ARTICLE · 04 AUGUST 2026

SFDR 2.0: Where The Reform Stands

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The EU institutions have reached consensus on replacing SFDR's Articles 8 and 9 with three product categories, but significant disagreements persist on fossil fuel exposure criteria and whether alternative investment funds marketed exclusively to professional investors should be exempt from the new categorisation regime. These unresolved issues carry particular weight for private markets participants navigating the evolving regulatory landscape.

European UnionFinance and Banking
John Verwey
John Verwey
Anna Maleva-Otto
Anna Maleva-Otto
Rachel E. Lowe
Rachel E. Lowe
Michael Singh
Michael Singh
Sulaiman Malik
Sulaiman Malik
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The EU institutions agree that SFDR should move away from Articles 8 and 9 towards three product categories. They remain divided, however, on two questions that matter particularly to private markets: fossil fuel exposure and an exemption for alternative investment funds offered exclusively to professional investors.

Where the process stands

The European Commission published its SFDR 2.0 proposal on 20 November 2025. It would replace the current framework with three voluntary categories: Sustainable, Transition and ESG Basics. Each category would have prescribed criteria, including a general requirement for at least 70 percent of the portfolio to support the relevant strategy.

The Council of the European Union agreed its negotiating mandate on 24 June 2026. The European Parliament has not yet finalised its position, and the relevant ECON vote has reportedly moved to September 2026. The trilogue cannot begin until Parliament adopts its mandate. From a timing perspective, the Council

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