SFDR Reform Proposal (COM(2025) 841 final)

Key Changes According to Final Proposal of November 20, 2025

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New Product Categorization The reform replaces the current system (Articles 6, 8, 9) with a clearer three-category system:

• Article 7 - Transition Category: Products that invest in the transition of companies/activities toward sustainability

• Article 8 - ESG Basics Category: Products that integrate sustainability factors beyond risk management

• Article 9 - Sustainable Category: Products that invest in sustainable companies/activities

 

Scope Restrictions

Financial advisors are completely removed from the scope of application

Portfolio management services are also excluded

Focus exclusively on manufacturers/providers of financial products

 

Simplification of Disclosure Requirements

• Elimination of entity-level disclosures on Principal Adverse Impacts PAIs (Article 4)

• Elimination of remuneration policy disclosures (Article 5)

• Significantly reduced product-level disclosures

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Main Differences: Current SFDR vs. Reform Proposal

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Overview of New Regulations

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Article 6a - Voluntary Sustainability Information

Non-categorized products may mention sustainability aspects

But: maximum 10% of document volume

Not permitted in KIID/KID

No sustainability-related claims

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Article 7 - Transition:

70% minimum investment in transition objectives

Exclusions: Art. 12(1) DelReg 2020/1818 (a-d)

Additionally: New projects for fossil fuels

PAI: Identification + disclosure + measures

Safe Harbour: EU CTB/PAB replication or 15% Taxonomy

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Article 8 - ESG Basics:

70% minimum integration of sustainability factors

Exclusions: Art. 12(1) DelReg 2020/1818 (a-d)

No PAI disclosure required

Approaches: ESG rating, sustainability indicators, track record

 

Article 9 - Sustainable:

70% minimum investment in sustainability objectives

Exclusions: All from DelReg 2020/1818 Art. 12(1)

Additionally: Fossil fuels largely excluded

PAI: Identification + disclosure + measures

Safe Harbour: EU PAB replication or 15% Taxonomy

Special consideration: EuGBS, EuSEF, EU programs

Impact Products (Art. 7(4) & 9(4)):

Additional requirements for "impact" claim

Predefined, measurable impacts

Impact theory required

Regulations for measurement, management, reporting

 

Article 9a - Combination Products

Fund-of-funds regulation

Can be categorized with 70% investment in categorized products

Non-categorized products: Disclosure of composition

Reliance on information from underlying products

 

Articles 10 & 11 - Website & Periodic Reports

Significantly simplified

Focus on categorized products

Templates should be maximum 2 pages (pre-contractual) + 2 pages (periodic)

Indicators are largely optional (Annex from DelReg 2022/1288 as template)

 

Article 12a - Data and Estimates

Formalization of the use of estimates

Documentation requirement for data sources

Documentation requirement for estimation methods

Information available to investors upon request

 

Article 13 - Marketing & Names

Sustainability-related claims only for categorized products (Art. 7/8/9)

In names: only categorized products

In marketing: categorized + Art. 9a products

"Impact" only for impact products (Art. 2(26))

ESG rating disclosure if used in marketing

 

New Regulation - Gold-Plating Prohibition

Art. 14(3)

Member states may not impose additional requirements regarding:

Information obligations (Art. 3, 6, 10, 11, 13)

Categorization criteria (Art. 7, 8, 9)

Ensuring the Single Market

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Implementation Outlook

Legislation (2025-2027)

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November 2025: Commission proposal published

By end of 2026: Expected adoption by European Parliament and Council

Early 2027: Entry into force of regulation

Repeal of DelReg 2022/1288 at time of application

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Transitional Arrangements

Article 17(1) - Protection of existing rights:

Closed-end funds launched before the application date

Can be exempted from application (opt-out)

Decision lies with FMP

No grandfathering regulation for existing Art. 8/9:

All existing products must re-categorize

Or become "non-categorised" with restricted marketing opportunities

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The Omnibus Initiative: Simplifying Sustainability Reporting

On February 26, 2025, the European Commission presented far-reaching proposals to simplify EU sustainability regulation as part of its "Simplification Omnibus" initiative. The goal is to significantly reduce the administrative burden on companies – by at least 25% for all companies and 35% for SMEs – without abandoning the fundamental sustainability objectives of the European Green Deal.

The initiative was developed in response to reports by Enrico Letta ("Much More than a Market") and Mario Draghi ("The Future of European Competitiveness") and is intended to strengthen the competitiveness of the European economy.

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Core Points of Omnibus Amendments to CSRD

1. Drastic Reduction in Scope (by approximately 80%)

The reporting obligation will in future only apply to large companies with more than 1,000 employees (additionally, either €50 million in revenue or €25 million in balance sheet total must be reached). This means:

Capital market-oriented SMEs are completely exempt from reporting requirements

Large companies with 250-1,000 employees are no longer obligated

An estimated 80% of originally affected companies are exempt

2. Postponement of Application Dates ("Stop-the-Clock")

Wave 1 (companies already subject to reporting with >500 employees): Must report in 2025 on fiscal year 2024 – NO postponement

Wave 2 (large companies): Postponement by 2 years – first reporting in 2028 on fiscal year 2027 (instead of 2026 on 2025)

Wave 3 (listed SMEs): Postponement by 2 years – first reporting in 2030 on fiscal year 2028 (instead of 2028 on 2026)

The "Stop-the-Clock" Directive (EU) 2025/794 was published on April 17, 2025 and has already entered into force.

3. Introduction of a "Value Chain Cap"

To limit the "trickle-down effect" on smaller companies in the supply chain:

The EU Commission should issue a voluntary SME standard (VSME – Voluntary SME Standard)

Companies with up to 1,000 employees can voluntarily report according to this simplified standard

Companies subject to reporting requirements may only request information from suppliers with <1,000 employees in accordance with VSME

4. Reduction of Content Reporting Requirements

Relief in reporting on value chain information

Wave 1 companies may exclude certain information on sustainability-related risks ("Quick-Fix")

Possible simplifications in ESRS requirements (details still under negotiation)

5. Changes in Auditing

No more development of separate EU audit standards

Permanently only auditing with "limited assurance," no obligation for "reasonable assurance"

6. EU Taxonomy Simplifications

For companies with more than 1,000 employees but less than €450 million in revenue: Voluntary taxonomy reporting

Further simplifications in delegated acts under discussion

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Timeline and Current Status (November 2025)

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Impact on German Companies

Wave 1 companies (>500 employees, already reporting under NFRD):

Must report in 2025 on 2024 (no postponement)

Benefit from "Quick-Fix" relief

Companies with 500-1,000 employees may potentially be completely exempt in the future

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Wave 2 companies (large companies, 250-1,000 employees):

Benefit from 2-year postponement

Many fall completely out of reporting obligation due to raised threshold of 1,000 employees

Capital market-oriented SMEs:

Complete exemption from reporting obligation

Can report voluntarily according to VSME

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National Implementation in Germany

Germany has NOT yet transposed the CSRD into national law (deadline was July 6, 2024). In July 2025, the Federal Ministry of Justice published a new draft with a threshold of 1,000 employees. The legislative process is currently ongoing but will likely need to be adjusted again after the Omnibus negotiations are concluded.

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European Supply Chain Act

Following the vote in the European Parliament on November 13, 2025, the EU Supply Chain Act will be significantly weakened. In addition to raising the threshold sizes for companies, the obligation to prepare climate plans has now been eliminated, for example. The German Supply Chain Act in its current version is now stricter in some areas and will presumably be adjusted to the European regulatory level.

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In Summary

These administrative reliefs can create space for a strategic consideration of sustainability: Which sustainability strategy will favor the company's competitive position in the long term?

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