SFDR 2 Paving the way for a credible and coherent EU financial market

The document argues that the original SFDR framework led to confusion and greenwashing due to vague criteria for fund classification. It recommends that the proposed SFDR 2 exclude fossil fuel developers from all categories—including 'ESG'—and establish clearer, data-driven definitions for 'transition' funds based on emissions, targets, and investments. Additionally, it warns against reducing transparency requirements, such as Principle Adverse Impacts (PAIs), and opposes clauses that would prevent EU Member States from implementing more ambitious national transparency rules.

• The original SFDR framework caused market confusion and greenwashing because asset managers had too much discretion in classifying funds under articles 8 and 9, often modifying these assignments without clear justification.
• The European Commission's proposal for SFDR 2 suggests excluding companies developing new fossil fuel projects from 'sustainable' and 'transition' categories, but Reclaim Finance argues this exclusion must be extended to the 'ESG' category to ensure credibility.
• Existing ESMA fund naming guidelines are insufficient because providers have bypassed fossil fuel exclusions by renaming funds using unregulated terms like 'selected' or 'engaged' instead of 'sustainable' or 'ESG'.
• The criteria for the 'transition' category in the Commission's proposal are too vague, potentially allowing 'transition washing' through empty commitments or narrow decarbonization targets.
• Reclaim Finance recommends that the assessment of 'transition' funds be based on a specific basket of criteria including historical emissions (scope 1-3), decarbonization targets, and investment allocation.
• The proposed derogation allowing a lower threshold for 'transition' funds if they show 15% EU taxonomy alignment is viewed as inconsistent because the EU economy was already estimated to be 12.9% taxonomy-aligned in 2023.
• The proposal to reduce Principle Adverse Impacts (PAIs) and introduce a maximum harmonization clause could conflict with existing national laws, such as France's Article 29, and reduce overall market transparency.

APA

Reclaim Finance (n.d.). SFDR 2 Paving the way for a credible and coherent EU financial market. https://reclaimfinance.org/site/wp-content/uploads/2025/12/Advocacy-note-SFDR-2-Reclaim-Finance.pdf

Chicago

Reclaim Finance. SFDR 2 Paving the way for a credible and coherent EU financial market. n.d. https://reclaimfinance.org/site/wp-content/uploads/2025/12/Advocacy-note-SFDR-2-Reclaim-Finance.pdf.

Wikipedia

{{cite report |author=Reclaim Finance |title=SFDR 2 Paving the way for a credible and coherent EU financial market |url=https://reclaimfinance.org/site/wp-content/uploads/2025/12/Advocacy-note-SFDR-2-Reclaim-Finance.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{reclaimfinancendsfdr, author = {{Reclaim Finance}}, title = {{SFDR 2 Paving the way for a credible and coherent EU financial market}}, institution = {Reclaim Finance}, url = {https://reclaimfinance.org/site/wp-content/uploads/2025/12/Advocacy-note-SFDR-2-Reclaim-Finance.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }