Inside SFDR 2.0: What the Updated Framework Means for Market Participants
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The Sustainable Finance Disclosure Regulation (SFDR) was first introduced by the European Commission in 2019 and came into force in 2021 as part of a package of legislative measures arising from its Action Plan on Sustainable Finance. The regulation established standardized disclosure requirements for financial market participants to assess the integration of ESG factors at both entity and product levels. Its primary objective was to enhance transparency around sustainability risks in investment processes and enable informed decision-making on financial products.
Following its implementation, the Commission identified significant challenges in the regulation's practical application, with concerns around potential greenwashing and complexity of disclosures. In 2023, the EC launched a public and targeted consultation on the effectiveness of the SFDR. This was followed up with further engagement with industry, supervisory authorities, and Member States to determine the future of the regulation with the aim of enhancing efficiency, strengthening investor protection, and meeting market realities.
Based on this assessment, on 20th November 2025, the Commission published the proposed amendments to the regulation which introduces a significantly restructured framework for sustainability-related disclosures and financial product classifications.
