European Commission Proposes Simplified Transparency Rules for Sustainable Financial Products

The Commission introduces changes. These changes simplify transparency. They target financial products with clear social and environmental aims. They improve clarity with short word bonds. They cut complexity by bringing words close. They match disclosures with market facts. Both investors and providers gain.

Background: Challenges with the Current SFDR Framework

SFDR started in 2019. It became effective in March 2021. The rule creates long texts. Many retail investors get confused. The rule acts like a label. It risks greenwashing and mis-selling. Money does not flow to Europe’s green aims.

Core Improvements in the Proposal

1. Simplified Disclosures

• The Commission removes entity-level disclosures.
  The rule cuts principal impact details at the entity level.
  It avoids overlap with the CSRD.
  It lowers costs for financial market players.

• Disclosures now focus on the product level.
  They use close word pairs.
  They give available and comparable sustainability data.
  They help retail investors to understand quickly.

2. Clear Categorisation of Sustainable Financial Products

Investors see three simple product types:

• Sustainable Category:
  These products invest in high-sustainability projects.
  They meet strict sustainability nodes.

• Transition Category:
  These products invest in companies on a clear green path.
  They show a steady path to better sustainability.

• ESG Basics Category:
  These products follow ESG pointers but without strict markers.
  They may pick best performers or use ESG risk limits.

Each type keeps 70% of investments on its green path. No funds go to harmful sectors. Tobacco, banned arms, or too many fossil fuel investments are cut off. Marketing claims have strict checks. These checks curb greenwashing and build trust.

Expected Impact and Next Steps

The changes lower admin tasks and costs. They give clear and short information. They let more retail investors join sustainable finance. They also boost Europe’s Savings and Investments Union aims.

Now, the proposal waits. The Parliament and Council will debate next. After approval, the Commission can set new technical rules.

Source: European Commission, November 20, 2025
Original report by PubAffairs Bruxelles – EU Debates, News & Opinions

About the Sustainable Finance Disclosure Regulation (SFDR):
SFDR is an EU rule that makes financial players share clear ESG facts. It supports Europe’s broad plan for sustainable finance.

For more insights into European sustainable finance policy, stay tuned to our blog. We share fresh updates and expert views.

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