About
Regulation (EU) 2019/2088 on sustainability related disclosures in the financial services sector ("SFDR") constitutes a framework intended to increase transparency in the financial services sector. The regulation sets out detailed requirements for certain financial actors, such as fund managers and investment firms, pertaining to their activities and certain financial products.
The SFDR introduces disclosure requirements on an entity level (pertaining to the financial services sector undertaking itself), as well as product related disclosure requirements (pertaining to the financial product). The requirements include website disclosures, pre-contractual disclosures (typically in a prospectus or an information memorandum) and periodic disclosures. The exact disclosure requirements will depend on the sustainability ambitions and the classification of the product. Products that promote environmental or social characteristics (article 8) and products that have sustainable investment as its objective (article 9) are subject to additional reporting requirements.
The more detailed "hows and wheres" of the requirements are for the most part set out in the delegated regulation. For several of the requirements, there are strict disclosure formats, with the aim of striking a balance between accessible and comparable information on the one hand and the necessary accuracy and complexity on the other hand. The original templates have been subject to critique by many because they, contrary to the intended aim, often prove difficult to use both for financial market participants/advisors and investors. Revised templates have been proposed by ESMA in its final report on amendments to the level 2 regulation, published 4 December 2023.
The SFDR's product related disclosures are closely linked to certain disclosure requirements set out in the EU Taxonomy Regulation. The EU Taxonomy Regulation supplements the SFDR as it introduces taxonomy-specific product disclosure requirements for financial products having certain environmental sustainability ambitions. The disclosure requirements pertain to the financial products' taxonomy related "performances". Enterprises within the scope of both regulations should be aware that the two regulations have separate definitions of "sustainability". The definition set out in the SFDR has a wider scope which includes social sustainability.
A cornerstone delegated regulation (level 2 legislation), detailing many of the key requirements of the main regulation (level 1 legislation) was adopted by the EU Commission on 6 April 2022 and is applicable as of 1 January 2023 in the EU and 11 December 2023 in Norway.
Further guidance on key issues under the SFDR and the accompanying level 2-legislation has been provided by the European Commission and the ESAs since the SFDR was adopted, including Q&As on the level 1 legislation and statements from the ESAs containing clarifications on the level 2-legislation.
The SFDR is currently under review, and the Commission published its amendment proposal on 20 November 2025. The Commission states that the review process, which has been running since 2023, has shown that "the current framework results in disclosures that are too long and complex, making it difficult for investors to understand and compare the environmental or social characteristics of financial products". It also emphasizes that "the SFDR has effectively been used as a de facto labelling system, causing confusion – particularly for retail investors – and increasing the risk of greenwashing and mis-selling".
The Commission aims to remedy these implications by, among other things, introducing three distinct product categories ("Sustainable", "Transition" and "ESG Basics"), removing reporting requirements on the "entity level" and simplifying reporting requirements on the product level.
Who does it impact?
Financial market participants ("FMPs") and "financial advisers" (see the regulation for definitions) directly, as well as investors and investees indirectly.
Status: In force
In force and applicable in the EU member states. Detailed regulations applicable as of 1 January 2023.
In force in Norway as of 1 January 2023 through a new Norwegian act (Nw.: Lov om offentliggjøring av bærekraftsinformasjon i finanssektoren og et rammeverk for bærekraftige investeringer), adopted in December 2021. Included in the EEA Agreement through a Joint Committee Decision of 29 April 2022.
On 4 December 2023, the ESAs published a proposal for a revised level 2 legislative act. The proposal is subject to review by the Commission.
The Commission proposed major changes to the SFDR on 20 November 2025, which have been submitted to the Parliament and the Council for their deliberation.
Relation to other initiatives and regulations
- The SFDR is a key step of the Commission's action plan on financing sustainable growth
- The SFDR is also linked to the Taxonomy Regulation
Participants
The EU and EEA.
Thommessen's comments
The SFDR represents a major development in sustainable finance as it introduces legislation pushing towards sustainability-related transparency in the financial services sector. The overall objective is to provide accurate information to both end investors and the wider public, and thereby also preventing greenwashing. Enhanced availability and accuracy of information is intended to assist sustainability-oriented investors in selecting products that align with their preferences.
The SFDR makes its mark across other sector specific EU legislation, setting out obligations on financial services actors already covered by legislation such as the UCITS Directive, AIFMD and MIFID II. Covered entities must make certain sustainability-related disclosures for both the entities themselves as well as the financial products they make available or advise on. The SFDR thus leads to increased consciousness of sustainability matters in the financial services sector.
The product-related disclosures, pertaining to such as alternative investment funds and UCITS, have proven important. Even though the SFDR was not meant as a labelling regime, it has in practice been adopted by the market as such, giving rise to quasi product categories of "article 8" and "article 9" funds, the "label" referencing the SFDR article the financial product is required to report in accordance with. The Commission has stated the market's perception of the SFDR as a labelling regime may undermine the intended goal of the disclosures and confuse investors.
The market's perception and adoption of the SFDR is an important reason for the Commission proposing a comprehensive revision of the SFDR. The proposal, published 20 November 2025, would, if adopted, introduce three distinct product categories: "Sustainable", "Transition" and "ESG Basics". Other key proposed changes include removing reporting requirements on the "entity level" and removing "financial advisors" from scope.