News From The SFDR 2.0 Engine Room – An Update On The Current Status Of The Process As Of Mid-April 2026

The revision of the Sustainable Finance Disclosure Regulation (SFDR) is one of the most consequential regulatory developments currently underway for asset owners and asset managers operating in the EU. Since the European Commission published its legislative proposal in November 2025, the process has moved at a measured but consistent pace across all three EU institutions.

This update provides a concise overview of where matters stand as of mid-April 2026: what has happened since the proposal was published, what the key milestones are through the summer, what the realistic implementation timeline looks like, and which substantive questions remain live and unresolved.

The headline message is one of orderly progress. The core architecture of the revised framework commands broad support. The remaining open questions are primarily technical, but they are consequential: how investment thresholds are measured, whether structured products fall within scope, and how SFDR will align with MiFID and PRIIPs are all matters that will shape the operational and commercial implications of the new regime. We will continue to monitor and report on these as negotiations develop.

What has happened since the proposal was published?

The European Commission published its legislative proposal to revise the SFDR on 20 November 2025, marking the formal start of the SFDR 2.0 legislative process. You can find our detailed client briefing titled “Decoding the SFDR 2.0 revision: implications for financial institutions” (status February 2026) here.

European Parliament

In the European Parliament, the file has been assigned to the Committee on Economic and Monetary Affairs (ECON) as the responsible committee. On 29 January 2026, ECON appointed Gerben‑Jan Gerbrandy (Renew Europe, Netherlands) as Rapporteur for SFDR 2.0. He will be responsible for drafting and presenting the report adopted by ECON, which will contain proposals for amendments to the SFDR 2.0 proposal. The report will subsequently be considered and voted on in a plenary session of the European Parliament. The Rapporteur has publicly described his objective as making legislation that is: “fit for purpose”: legislation that “people can understand and use”, that “protects consumers, and relieves the financial sector from a large bureaucratic burden.”

The shadow rapporteurs appointed by the other political groups to represent their respective political positions and interests in the legislative process are:Luděk Niedermayer (EPP, Czechia), Lara Wolters (S&D, Netherlands), Jaroslava Pokorná Jermanová (PfE, Czechia), Denis Nesci (ECR, Italy), Kira Marie Peter-Hansen (Greens, Denmark) and Martin Günther (The Left, Germany).

Council

Following publication of the proposal, responsibility at Council level was assigned to the Council’s Working Party on Financial Services and the Banking Union (CWP), operating under the Cypriot Presidency until June 2026. The CWP has already held several meetings discussing various SFDR 2.0 items, with the most recent one taking place on 17 April 2026.

Feedback period

The Commission opened its feedback period on 15 December 2025, allowing stakeholders to submit their views on the proposal. The feedback period closed on 6 April 2026, with a significant volume of responses received from asset managers, institutional investors, industry associations and NGOs. Feedback submissions are published on the Commission’s official "Have your say" portal. Please see our recent publication "SFDR 2.0 in focus: Key industry pressure points and early signals from Council and European Parliament" for our analysis of the key themes emerging from some of the main position papers.

What are the next steps until summer?

The process is advancing in an orderly and largely uncontroversial manner across the three institutions. The Rapporteur has indicated that he intends to publish a draft report by the end of April 2026, setting out the European Parliament’s initial amendment proposals.

At Council level, the Cypriot Presidency is targeting the adoption of a negotiation position by June 2026, based on the convergence reached in the CWP. Ireland will assume the Council Presidency from 1 July 2026. Whilst no official Irish government position on the SFDR 2.0 proposal has been published to date, industry associations operating in Ireland have been active: the Banking and Payments Federation Ireland has issued recommendations for the Irish Presidency to prioritise harmonisation across SFDR and related regulatory files, including CRR/CRD, MiFID, CSRD and the EU Taxonomy; and the Irish Funds Association, in its response to the Commission feedback period, has welcomed the more streamlined and proportionate approach whilst identifying areas requiring further adjustment, including alignment with ESMA Fund Naming Guidelines, early publication of Level 2 measures, clarity sovereign bond treatment, and improved coordination across SFDR, MiFID and IDD.

The European Parliament is expected to adopt its negotiation position in July or August 2026, following which trilogue negotiations involving the Parliament, the Council and the Commission are expected to commence in September 2026.

What does this mean for the implementation of SFDR 2.0?

Trilogue negotiations are expected to begin in September 2026. A political agreement on the SFDR 2.0 Level 1 text could be reached in November or December 2026, assuming a smooth trilogue phase. Work on the SFDR delegated act – covering the Regulatory Technical Standards that will constitute the Level 2 framework - would then commence in early 2027.

Against this backdrop, SFDR 2.0 could realistically start to apply from mid-2028. However, an early 2029 application date remains a plausible alternative scenario, in particular if Member States succeed in securing a 24-month implementation period at Level 1 rather than the 18-month period proposed by the Commission. This issue remains open in CWP discussions.

We have prepared a comprehensive timeline setting out the relevant negotiation, adoption and implementation milestones which is available on our website and will be updated from time to time.

What are the main discussion points currently?

A total of 195 feedback submissions were received in response to the Commission’s proposal. More than 60% of respondents were companies, businesses or business associations, and almost 10% were non-governmental organizations. The remainder comprised public authorities, EU citizens, trade unions academic institutions, and a single consumer organization.

Our detailed analysis of some of the main submissions is set out in our publication “SFDR 2.0 in focus: Key industry pressure points and early signals from Council and European Parliament”.

The CWP of the Council is currently looking at the following discussion points:

Application to other retail products (e.g. structured products)

The CWP is still deliberating on whether to include structured products - and consequently the financial market participants that manufacture them - within the revised SFDR framework. The Commission's original proposal does not include structured products, and this position has majority support among Member States. However, the Presidency has kept the question open in light of stakeholder feedback and the positions of a number of delegations. Inclusion would help ensure that all investment products marketed with sustainability features are assessed and disclosed on a consistent basis and would facilitate alignment between SFDR and MiFID/IDD distribution rules as well as future changes to the PRIIPs KID.

Entity-level disclosures on sustainability risks, principal adverse impacts and remuneration

Most Member States support simplifying the disclosures on sustainability risk integration at entity level. One Member State has proposed deleting this disclosure in its entirety on the basis that ESG integration is already addressed in sectoral legislation and that SFDR should focus exclusively on products. There is a broad consensus to delete the entity-level principal adverse impact (PAI) disclosures and disclosures on the remuneration policy, though a small number of Member States have cautioned that removing entity-level PAI disclosures entirely risks over-simplification and reduced comparability. Industry has additionally called for entity-level relief to take immediate effect upon the regulation entering into force, rather than being subject to the same transitional period as product-level requirements.

Thresholds

The three voluntary product categories - Transition, Sustainable and ESG Basics - are each underpinned by a 70% investment threshold, though some Member States have indicated a preference for a higher threshold of 80%. Some Member States have raised practical concerns about requiring disclosure of the exact share of investments, particularly for products with frequently changing portfolios. They have sought clarity on whether these thresholds must be met continuously or only at the reporting date, and whether calculations should be performed monthly, quarterly or annually. These questions are expected to be addressed at Level 2.

Names

On naming, the use of the term “ESG” for the ESG Basics category is not fully supported, with some Member States noting translation difficulties. The Cypriot Presidency has suggested using either “ESG” or “sustainable” combined with qualifiers such as “Basic” and “Advanced” to reflect the hierarchy between the categories.

PRIIPs and MiFID alignment

An unresolved cross-cutting issue is the ongoing misalignment between the product perimeters and sustainability disclosure requirements under SFDR, MiFID and PRIIPs. The industry has consistently called for the MiFID and IDD sustainability preferences regimes to be reviewed and updated on the same timeline as SFDR 2.0 and has asked the Commission to set a clear timetable for doing so. Without this alignment, product perimeter mismatches risk creating operational complexity and inconsistent investor disclosures across the distribution chain - an issue that affects asset managers regardless of whether structured products are ultimately brought within SFDR scope.

What to expect from the further process and what to do now

SFDR 2.0 is moving forward with a degree of institutional coherence that was not always evident in the early years of the original SFDR regime. The broad agreement on fundamental architecture - a shift from mandatory categorization to a voluntary, product-focused disclosure framework, with reduced entity-level obligations and a more proportionate approach overall - provides a stable foundation for the negotiations ahead.

The months between now and the summer will be decisive. The publication of the rapporteur's draft report and the Council's negotiation position will, for the first time, put concrete amendment texts on the table and reveal where the substantive fault lines lie. It is at that point that the political temperature around certain contested issues is likely to rise.

For financial market participants, the practical priority is preparation. On the product side, the voluntary categorization framework is sufficiently well-defined at Level 1 to allow preliminary mapping of existing funds and other financial products against the Transition, Sustainable and ESG Basics categories, even whilst the precise threshold methodologies and exclusion criteria await Level 2 specification. Moreover, engaging early in the Level 2 process - whether directly or through industry associations - will be important given the weight of technical detail to be resolved there.

We will continue tracking developments closely and will publish further updates as the legislative process advances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.