SFDR: Fostering investment in decarbonisation and sustainable growth

Policy recommendations for a fit-for-purpose SFDR

The Sustainable Finance Disclosure Regulation (SFDR) is a key element of the EU sustainable finance framework. Since its inception, it has improved transparency with the integration of sustainability risks, and the consideration of sustainability impacts in investment decisions.

However, some challenges prevent the SFDR from fully delivering on its objectives. Despite being a disclosure-based regulation, the framework has been used by market participants as a product classification system. Insufficient clarity of certain concepts and definitions, a lack of robust criteria, and diverging interpretations from market participants and supervisors have led to market fragmentation and greenwashing concerns.

The review of SFDR is expected to be published in Q4 2025, and the EC is currently exploring several policy options regarding its content. Eurosif, based on detailed input from its members and the Advisory Group composed of investors and other Financial Market Participants (FMPs), is now publishing this report to present its detailed policy recommendations for improving the SFDR framework to ensure that it is clear, effective and fit-for-purpose.

In the broader context of EU strategic initiatives, such as the Savings and Investment Union and the Clean Industrial Deal, this review presents a great opportunity to fix the flaws of the SFDR and to enable end investors – the owners of invested assets, including retail investors - to scale-up finance for sustainable growth and the decarbonisation of the EU economy.

Key recommendations

• Establish clear, mandatory categories of ESG/sustainability-related products based on minimum criteria
• Empower end-investors with meaningful disclosure requirements
• Beyond the SFDR: create a reliable and consistent EU sustainable finance framework

Access the report here