Eurosif Warns of Critical Gaps in EU's SFDR Review Position

Eurosif, Europe's leading sustainable finance association, has raised concerns about significant shortcomings in the EU Member States' negotiating position on the revised Sustainable Finance Disclosure Regulation (SFDR), adopted at COREPER on June 25, 2026.

While welcoming the maintenance of the European Commission's overall framework architecture, Eurosif identified several critical gaps that could undermine the regulation's credibility and effectiveness in combating greenwashing.

Key concerns include:

• Professional investor opt-out: The proposed exemption could allow products targeting exclusively professional investors to escape SFDR requirements, leaving smaller institutional investors like local government pension schemes without essential protections and comparability safeguards.
• Missing safeguards: The absence of the Do No Significant Harm principle for sustainable categories and lack of minimum social and governance standards across all product categories weaken the credibility of sustainability claims.
• Asset class gaps: The framework lacks dedicated criteria for products with social objectives and specific asset classes such as real assets.
• Transition loopholes: Rules allowing companies with just 20% of capital expenditure aligned with EU Taxonomy standards to bypass exclusion requirements lack rigor, particularly for fossil fuel companies where Scope 3 emissions are often most material.
• Sovereign bond treatment: Permitting general-purpose sovereign bonds to count toward transition objectives up to 15% of portfolios creates ambiguity about their actual contribution to climate goals.
• Disclosure limitations: The Council position restricts Principal Adverse Impact indicator disclosures to sustainable and transition categories, reducing comparability across the market.
• Entity-level transparency: Deletion of entity-level disclosures would deprive investors and regulators of context needed to assess alignment between product claims and firms' overall sustainability practices.

Nathalie Dogniez, Chair of Eurosif, stated that criteria and thresholds require better calibration for different asset classes to ensure practical effectiveness, while emphasizing that omitting the Do No Significant Harm principle represents a major credibility concern.

Aleksandra Palinska, Executive Director of Eurosif, argued that the transition category must enable clear identification of genuine climate commitments, noting that companies continuing to develop new oil fields cannot credibly claim transition status regardless of renewable energy investments.

Eurosif is calling on co-legislators to strengthen the framework by reinforcing core criteria, implementing robust minimum safeguards across all product categories, and ensuring meaningful transparency at both product and entity levels.

The European Parliament's Economic and Monetary Affairs committee is scheduled to vote on its position on July 15, 2026. This will initiate trilogue negotiations between the Parliament, Council, and Commission, with the goal of reaching agreement by year-end under Ireland's Council presidency.