Harish joined the Business Development team at Integrum ESG after having previously overseen BD for the investment network Venture Giants, and also worked within the Customer Experience Program Team at Amazon. He has a BSc in Philosophy, Logic and Scientific Method from the London School of Economics and Political Science.
SFDR 2.0 is the European Commission’s proposed update to the EU sustainability disclosure regime.
The new framework replaces the existing Article 6, 8 and 9 structure with a more precise set of product categories, each with defined criteria, exclusion rules and minimum expectations for sustainability evidence.
The reform is designed to reduce greenwashing, improve comparability for allocators and create stronger alignment between fund reporting and corporate disclosures under CSRD. Full implementation is expected from 2028.
The Commission aims to deliver a framework that is easier to understand, easier to supervise and more consistent across the market.
SFDR 2.0 introduces clearer categories, uniform baseline safeguards and closer alignment with corporate sustainability reporting:
Funds with no sustainability ambition.
They are not subject to exclusions or minimum allocation requirements and they may not use ESG terminology in names or marketing.
Funds that invest in companies improving their environmental or social performance.
At least 70 percent of assets must support the transition objective.
These products must apply Climate Benchmark exclusions and additional fossil related restrictions, with indicators that focus on measurable improvement such as emissions intensity reductions.
Funds integrating ESG factors in a systematic way.
A minimum of 70 percent of holdings must follow the stated ESG approach and comply with Climate Benchmark exclusions.
Unlike Article 7 and Article 9, these funds are not subject to the enhanced fossil restrictions.
Funds pursuing a sustainability related objective.
At least 70 percent of assets must support that objective and comply with all exclusion requirements.
Managers must demonstrate a clear and credible link between portfolio holdings and the intended sustainability outcome.
Funds that invest mainly in underlying Article 7, 8 or 9 products.
At least 70 percent of assets must be allocated to qualifying funds and comply with the relevant indicator and exclusion rules.
Articles 7, 8, 9 and 9a must apply Climate Benchmark exclusions covering coal mining, coal power without a credible phase out plan, oil and gas expansion, controversial weapons and repeated breaches of global norms.
Articles 7 and 9 are subject to stricter fossil related rules. These require credible transition commitments and limit exposure to companies pursuing new fossil projects.
Fund names must accurately reflect their category.
Article 6a funds cannot use sustainability related terminology. Articles 7, 8, 9 and 9a may reference themes such as sustainable, transition, climate or impact, but only where the strategy provides supporting evidence.
The current RTS templates will be replaced by a focused set of category specific indicators that align with CSRD data.
The indicators will differ by category and may include transition metrics for Article 7, ESG integration metrics for Article 8 and objective based indicators for Article 9.
Political negotiation is expected to continue into 2026.
Technical standards will be developed through 2026 and 2027.
A transition phase is expected in 2027 and 2028, with full application from 2028.
SFDR 2.0 provides clearer expectations around sustainability features, giving clients a more consistent understanding of how a fund’s approach aligns with its stated aims.
They should benefit from:
The reforms should support more confident allocation decisions and reduce greenwashing risk.
Asset managers will need to reassess their product ranges, methodologies and disclosures to ensure alignment with the revised rules. Key priorities include:
Managers with strong data governance and clear methodological documentation will be best positioned for the transition.
If your fund is currently classified as SFDR Article 8 or Article 9:
- Confirm the most appropriate new category
Assess whether the strategy aligns more closely with Article 7, 8 or 9 under the revised definitions.
- Test the 70 percent minimum allocation requirement
Review whether the portfolio genuinely meets the ESG, transition or sustainability threshold.
- Review exclusion compliance
Confirm alignment with Climate Benchmark exclusions and, where relevant, the additional fossil related restrictions.
- Strengthen investment methodologies and documentation
Ensure ESG, transition or sustainability frameworks clearly reflect the chosen category.
- Select indicators that can be evidenced
Identify which category specific indicators can be embedded in research, monitoring and reporting.
- Review fund names and marketing language
Confirm alignment with naming rules and the category the fund intends to carry from 2028.
- Prepare for future disclosure updates
Although technical standards are still being developed, managers should begin planning for revised disclosure expectations.
If your fund is currently classified as SFDR Article 6:
- Decide whether to remain Article 6a or transition into a categorised approach
Consider commercial positioning, investor expectations and long term strategy.
- Choose the most suitable category if opting in
Options include Article 8 for ESG basics, Article 7 for transition or Article 9 for sustainability objectives.
- Identify the methodological changes required
Enhance ESG, transition or sustainability processes to meet category expectations.
- Assess ability to meet the 70 percent alignment rule
Evaluate whether the investment process and asset universe can support the required minimum alignment.
- Select relevant and measurable indicators
Introduce indicators that can be incorporated into due diligence, monitoring and reporting.
- Update naming and marketing
Remove sustainability language if remaining in Article 6a, or adopt category aligned naming if transitioning.
- Prepare for revised disclosures
Begin planning for updated investor materials once the technical details are finalised.
Operational steps for all funds:
- Strengthen governance and data processes
Reliable and auditable data will be essential for meeting evidentiary requirements.
- Train investment, product and distribution teams
Ensure consistent understanding of category requirements, exclusions and naming rules across teams.
- Plan coordinated client communications
Align prospectus updates, reporting cycles, website content and investor notices to ensure a smooth transition.
The firms that act early will be better equipped to navigate the new categorisation system, evidence the required 70 percent alignment and comply with the strengthened exclusion and naming rules.
Preparation should begin with a clear mapping of each product to its likely category, followed by a rigorous assessment of data availability, indicator readiness and exclusion compliance.
Strengthening governance, refining methodologies and aligning communications across product, investment and distribution teams will be essential.
By taking these steps now, managers can position themselves to meet regulatory expectations with confidence and maintain credibility in an increasingly disciplined sustainable finance landscape.
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