European Parliament ECON approves SFDR review mandate

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has approved a negotiating mandate for the review of the Sustainable Finance Disclosure Regulation (SFDR). This move sets the stage for trilogue negotiations expected to begin in October.

The proposed framework introduces three new product categories: Sustainable, Transition, and ESG Basics. Under the Transition category, companies with exposure to fossil-fuel activities may be included, provided they meet specific safeguards. Specifically, the proposal suggests a 20% Taxonomy-alignment threshold for the Sustainable category to meet positive-contribution requirements, which is higher than the 15% threshold proposed by the Council.

Regarding fossil fuels, the mandate includes safeguards to exclude companies generating revenue from new fossil-fuel exploration from the Transition category. For other fossil-fuel-related entities, the proposal requires that green investments exceed new fossil-fuel investments over a three-year rolling period.

Significant changes to the regulation's scope are also proposed. Financial advice and portfolio management would be removed from the SFDR scope. Additionally, products offered exclusively to professional investors may be exempt from certain disclosure requirements, and entity-level environmental and social impact disclosures would apply only to the largest financial market participants.