SFDR 2.0 introduces substantial changes to the existing framework, most notably replacing today’s Article 8 and 9 product categories with new product categories.

Transition Category (Article 7)

This category applies to financial products investing in, or contributing to, the transition of companies, activities or assets towards improved sustainability—an addition that is likely to be welcomed by the market.

ESG Basic Category (Article 8)

This category is designed for financial market participants that are integrating sustainability factors in their investment strategy beyond the consideration of sustainability risks.

Sustainability Category (Article 9)

This category is designed for financial market participants that have products that invest in sustainable undertakings, sustainable economic activities, or other sustainable assets, or contribute to sustainability.

To qualify for any of the Articles 7, 8, or 9 categories, the following common criteria must be met:

  • A minimum threshold of 70% alignment with the stated objective for the relevant category;
  • A mandatory list of exclusions, which refer to the exclusions for the Climate Transition Benchmarks and Paris-Aligned Benchmarks; and
  • A prescribed list of eligible investment types.

Mixed Category (Article 9a)

This category, while not a formal standalone category, is intended for products that combine underlying products falling within Articles 7, 8, or 9. It is particularly relevant for fund-of-funds strategies.

Uncategorised Products (Article 6a)

Products that do not fall into the above categories may disclose limited information on how they consider sustainability factors in their pre-contractual documentation.

Conclusion - what should fund managers take away? 

SFDR 2.0 represents more than a technical adjustment—it's a reframing of the EU’s entire sustainability finance disclosure landscape. Among the other notable changes are the removal of the “do no significant harm” concept (replaced by clear exclusions), the removal of entity-level PAI and remuneration-policy disclosures, and the introduction of new, streamlined pre-contractual and periodic disclosure templates limited to two pages.

The proposal will now enter the EU legislative process, expected to take 12–18 months, followed by an 18-month implementation period—placing the earliest application date around mid-2028.

This article was first published by Paperjam.