Sustainable Finance
SFDR 2.0: a more coherent and aligned framework for sustainable finance
Published on 26 November 2025
For several years, financial institutions have been working within a sustainable finance framework that was ambitious in intent but difficult to navigate in practice. The original SFDR created complexity for firms and confusion for clients: definitions evolved too often, disclosures overlapped across different regulations, ESG data was hard to obtain, and the distinction between Article 8 and Article 9 products became increasingly unclear. In this context, the European Commission has now published its SFDR 2.0 proposal, representing a substantial rethink of how sustainable financial products are categorised and disclosed, and how this framework connects with PRIIPs (the standardised information documents that retail investors receive when buying investment products). In our exchanges with ABBL members, a number of recurring challenges emerged: Excessive complexity, particularly for retail client communication Frequent changes to key definitions Misalignment between SFDR, MiFID, PRIIPs, CSRD and the EU Taxonomy A heavy administrative burden for in-scope entities Ongoing difficulties collecting reliable ESG data Against this backdrop, many of the ABBL’s long-standing recommendations are now reflected in the Commission’s proposal.
Summary
This proposal recognises the practical difficulties institutions have faced and takes important steps towards a clearer, more coherent and more usable sustainable finance framework.
Alexandre Dias
Adviser – Financial Markets & ESG
A clearer product categorisation
The introduction of three product categories represents a welcome step towards greater clarity:
- Article 7 – Transition category (criteria and disclosures)
- Article 8 – ESG basic category (criteria and disclosures)
- Article 9 – Sustainable category (criteria and disclosures)
The proposal also removes the former definition of “sustainable investment” (Article 2(17) of Regulation 2019/2088) and aligns terminology with the EU Taxonomy and the Technical Screening Criteria, creating a more coherent structure across the regulatory landscape.
Improvements at product level
Several updates respond directly to operational concerns raised by ABBL members:
Website disclosures
Article 10 has been revised to streamline online disclosures and eliminate redundancies with pre-contractual documentation.
Pre-contractual and periodic templates
The proposal simplifies these documents significantly, with a suggested two-page format for retail investors. This goes beyond the ABBL’s own recommendation for a three-page limit and represents a concrete effort to enhance usability.
PRIIPs Key Information Documents
The proposed amendments to the PRIIPs Regulation include a clearer reference to SFDR and the new product categorisation, improving consistency across investor documentation.
Improvements at entity level
The proposal removes Article 4, which required firms to disclose Principal Adverse Impacts (PAIs), indicators intended to show negative environmental or social effects associated with investments.
Eliminating entity-level reporting addresses a substantial administrative burden and refocuses PAIs on information that is genuinely relevant at product level.
More broadly, the ABBL continues to support better alignment of sustainability-related indicators across the overall framework and a rationalisation of ESG data requirements. The new Article 12a on the use of data and estimates reflects progress in this direction.
A pragmatic consideration of operational realities
The Commission also takes into account the specificities of financial institutions, particularly private banks. The proposal to remove credit institutions providing portfolio management or investment advice from the scope of SFDR responds to a long-standing request from ABBL members, notably in relation to discretionary portfolio mandates.
A constructive evolution of the framework
Overall, the proposal represents a meaningful step towards a more consistent, aligned and operationally workable sustainable finance framework. It reflects the need for clearer rules, reduced duplication and a better connection between the different regulatory building blocks.
The ABBL will continue to engage with members and European policymakers as the legislative process progresses, ensuring the framework remains both effective and proportionate.
Alexandre Dias
Adviser – Financial Markets & ESG
Published on 26 November 2025