Introduction
On May 2, 2025, the European Commission launched its anticipated "Call for Evidence" (CfE) on revising the European Union's Sustainable Finance Disclosure Regulation (SFDR), open for feedback until May 30, 2025.
Through the CfE, the Commission reiterated the SFDR’s objectives of drawing private investment to promote a more sustainable economy and ensuring that EU companies can capitalise on competitive opportunities arising from the growing emphasis on sustainability. To date, feedback on the SFDR indicates that many stakeholders believe it has delivered enhanced transparency and granted investors access to richer environmental, social, and governance (ESG) data.
However, financial market participants (FMPs) have also emphasised the SFDR’s complexity and the substantial compliance costs. Stakeholders have encountered various obstacles to implementation, such as a lack of clarity regarding key concepts and limited data availability. These obstacles prevent the SFDR's objectives from being fully achieved. These practical limitations lead to usability issues, especially in some sectors, and contribute to the increased risk of greenwashing.
Unlike the public and targeted consultations of December 2022, which received widespread industry responses, the CfE does not consist of specific questions on SFDR implementation. Instead, stakeholders are invited to submit general feedback to support the ongoing SFDR review and accompanying impact assessment.
This public consultation comes in the context of broader legislative changes to the sustainability reporting framework under the “Omnibus Package”, which was published on February 26, 2025 . The package proposed amendments to the EU Taxonomy and the Corporate Sustainability Reporting Directive (CSRD) with the aim of simplifying the sustainable reporting framework. In this context, the Commission confirms that the SFDR revision will seek greater alignment and strengthen the coherence of the overall framework. The goal is to reduce the burden of sustainability-related disclosures so that the EU can remain a sustainable and prosperous economy.
I. Objective of the SFDR review
The main goal of the review is to improve the effectiveness of the SFDR by simplifying and streamlining the rules and alleviating complex and onerous obligations. This includes minimising the burden of ESG reporting for FMPs and emphasising the information most pertinent to investors.
Additionally, the Commission confirms that the SFDR review aims to provide greater legal certainty and strengthen the consistency of the sustainable finance framework rules, considering proposed initiatives to simplify sustainability reporting for companies, such as the Omnibus Package.
II. Policy options
The CfE outlines different design options for the new SFDR regime. The new regime would:
- account for the varying needs of different investor profiles and product types;
- offer retail investors a more accessible means of understanding investment products;
- better reflect the global contours and exposures of such investments; and
- direct funding towards a wide array of sustainability-oriented objectives, such as investments in transitional entities and undertakings that further goals like security while mitigating greenwashing.
The prospective reforms include examining two main options:
- Targeted adjustments and clarifications to existing disclosure obligations, and
- More transformative amendments that introduce a range of product categories reflecting distinct sustainability objectives, each backed by shared criteria.
These categories include products with a direct sustainability aim, products focused on facilitating transition, and products supporting various ESG strategies.
In all cases, these options are expected to interact sensibly with the broader EU framework concerning the distribution of financial products to investors.
III. How to achieve the objectives
To achieve the stated objectives, the Commission confirms that the SFDR review should clarify the regulatory framework for financial market operators and end investors, including through the following:
- the simplification of core concepts;
- reducing and rationalising disclosure obligations to ensure that only critical investor information ("essential information") is conveyed.
- exploring whether financial products making sustainability-related claims should be placed in particular categories. These potential categories should be easily understandable to retail audiences, align with multiple EU sustainability objectives, and be feasible given current market practices regarding data availability and sustainability-oriented financial offerings.
Clarifying requirements, eliminating inconsistencies, and resolving constraints related to data availability would make them more straightforward. This would significantly reduce operational and compliance costs throughout the EU market, better serve the legislation’s objectives, and promote sustainable investment.
The introduction of product categories could provide investors with a clearer overview of available offerings and reduce the likelihood of greenwashing.
These options would interact sensibly with the broader EU framework concerning the distribution of financial products to investors.
What’s next?
After receiving feedback, an impact assessment will be conducted to support the development of this initiative. The assessment will be presented alongside an evaluation annex. In addition to public feedback, preparatory work will take into account specialised reports and proposals concerning potential amendments to the regulatory framework. These contributions will come from the European Supervisory Authorities, market specialists, and the Platform on Sustainable Finance.
FMPs have suggested potential changes and ideas that will be reviewed during the planned revision of the SFDR in the Commission’s work program for the fourth quarter of 2025. This aligns with the Commission’s commitment to simplifying corporate sustainability reporting requirements.
The Commission notes that no further public consultation is planned after this CfE, though it may conduct targeted outreach with stakeholder representatives.
While the CfE provides guidance on what the SFDR reform would entail, several policy options explored by the Commission would require clarification if adopted. These include the types of investors to whom the sustainability disclosures are targeted, what information would be considered essential to them, and the entities responsible for supervising the categorisation system.
It is important to note, however, that although the CfE provides guidance on what the SFDR reform would entail, some open questions would need to be clarified in the new version of the SFDR. For example, the definition of "essential information" must be clarified to avoid creating additional uncertainties. The entities responsible for supervising the categorisation system must also be clarified.
Additionally, it is crucial that reducing the disclosures does not lead to reduced efforts by FMPs or reduced ESG ambition by the EU.
Our sustainability experts, Aurélien Hollard and Julie Pelcé, will continue to monitor the progress of the legislative process and keep you updated on the latest developments. In the meantime, please contact us if you have any questions.
