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WWF Critiques European Commission’s SFDR Revision for Lacking Robust Safeguards

On November 20, 2025, WWF released a critical review. WWF warns that the Commission’s proposed SFDR revision may weaken the power of sustainable and transition finance. This finance is key to the EU’s 2030 climate and environmental goals.

Key Concerns Highlighted by WWF

• Weak Categorisation Criteria
  The Commission sets three product groups: sustainable products, transition products, and ESG basics. Each label holds close words that depend on simple checks. Yet, the rules stay soft. WWF notes that low-ambition products can join. Products linked to fossil fuel expansion may still qualify. Only coal is clearly banned in ESG basics. This choice risks misleading investors and stops capital from reaching truly sustainable projects.

• Problematic ‘ESG Basics’ Category
  The ESG basics group forms a wide and permanent class. It lacks a sunset clause to end its use. WWF sees danger here. The group may serve as a safe harbour for funds that claim ESG traits. These funds may not meet strict standards. As a result, investments might skip options that are more sustainable.

• Lack of Mandatory Engagement and Transparency
  Eighty-five percent of large investors work closely with companies to boost sustainability. Still, the SFDR revision makes such engagement optional and limits it to the transition products group. Non-categorised products do not come with clear disclaimers. Investors then face a higher risk of confusion and may fund unsustainable actions by mistake.

Positive Aspects of the Proposal

• Introduction of an ‘Impact’ Feature
  For both transition and sustainable products, the proposal adds an optional ‘impact’ tag. This tag explains how environmental effects are measured, managed, and reported. WWF views this as a step forward. It helps meet retail investors’ demand for clear, verifiable environmental impact.

• Partial Fossil Fuel Exclusions
  The proposal does force coal investments out of sustainable and transition groups. It also bans coal in ESG basics. Still, oil and gas extraction can continue under ESG basics. WWF sees this gap as a threat that may hurt overall climate credibility.

WWF’s Call to Action

WWF calls on the European Parliament and Member States to fix the SFDR revision. They urge policymakers to rely on scientific evidence, integrity, and best practice. A robust rule set is needed to guide capital toward truly sustainable and impactful investments. This approach must stop the reward of low ambition and end investor confusion.

Background: The Sustainable Finance Disclosure Regulation (SFDR)

The SFDR is an EU rule that boosts clarity in investment decisions. It makes sustainability risks and impacts more transparent. The proposed revision aims to fine-tune the rules on classification and disclosure. Under the new plan, products fall into these groups:

• Sustainable Products: Funds that fully match sustainability targets.
• Transition Products: Investments that help companies move toward sustainable practices.
• ESG Basics: Products that consider sustainability factors beyond risk management, but with looser rules.

Conclusion

WWF’s review points out important gaps in the SFDR revision. These gaps might weaken the EU’s drive toward sustainable finance. While the optional ‘impact’ reporting feature meets the demand for accountability, stronger safeguards and clear fossil fuel exclusions are still needed. Without them, the risk of greenwashing grows and investors may be misled. EU lawmakers now face a key moment. They must set rules that rest on scientific proof and clear standards. This will help ensure that financial markets support the EU’s climate and environmental goals.

Sources: WWF European Policy Office, European Commission proposal on SFDR revision (November 2025)

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