SFDR 2.0: Progress Made, But Is It Enough? – Analysis by Rosl Veltmeijer

The European Commission has proposed changes to the Sustainable Finance Disclosure Regulation. This update is called SFDR 2.0. It aims to boost transparency and limit greenwashing in sustainable finance. Rosl Veltmeijer, Portfolio Manager at Triodos Investment Management, says the changes show progress. Yet, many problems still persist.

Key Changes Introduced

• New Fund Categories: The old Article 6, 8, and 9 classifications have new labels. They now use three groups: Sustainable, Transition, and ESG Basics.
• Exclusions-Based Requirements: These rules define sustainability-related harm in scientific terms. They also align with EU law.
• Removal of Entity-Level PAI Reporting: This change drops heavy reporting. It removes rules that many saw as less useful for sustainability insights.

Areas of Concern

1. Uneven Transparency Requirements

Only funds labelled as Sustainable, Transition, or ESG Basics must share sustainability details. The detail level changes with each category. Funds without these labels can decide if they share the data. This gap may let harmful investments hide. Such a gap weakens investor protection and may allow greenwashing.

2. Insufficient Clarity and Comparability for Retail Investors

SFDR 2.0 says that at least 70% of a fund’s portfolio must match its sustainability claim. The rule gives wide flexibility, especially for ESG Basics. This can lead to different views on what is sustainable. ESMA, however, uses an 80% rule for naming funds. This difference may confuse investors.

3. Loopholes in ESG Criteria

It is good to see that fund exclusions now follow EU law. Yet, the ESG Basics group still allows fossil fuel investments (except coal and lignite). This rule may mislead investors into funding companies without proper transition plans. It can hurt true sustainable finance goals.

Conclusion: A Step Forward but Not the Finish Line

Rosl Veltmeijer says SFDR 2.0 improves on the old rules. It offers new categories and clearer exclusion standards. Still, the proposal misses a chance to create a fair market. It does not tighten the rules enough to stop greenwashing. Without fixing these gaps, trust in sustainability claims may fall. Investors may stay at risk.

About the Author

Rosl Veltmeijer is Portfolio Manager for the Triodos Sterling Bond Impact Fund. She leads discretionary fixed income impact investments at Triodos Investment Management. With over twenty years of experience in sustainability research and portfolio management, Rosl serves on the Dutch Fund and Asset Management Association’s Sustainability Committee. She also helps advance responsible investment standards across Europe.

For sustainable finance stakeholders and investors who seek trusted clarity on SFDR updates, this analysis calls for close watch and further regulatory improvement.

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