SFDR Update: European Commission launches Call for Evidence on simplification of the Sustainable Finance Disclosure Regulation ahead of revision scheduled in Q4 2025

On 2 May 2025, the Commission launched a Call for Evidence to inform its impact assessment for the simplification and improved effectiveness of the Sustainable Finance Disclosure Regulation (SFDR). 

The Call for Evidence forms part of the comprehensive assessment launched in 2023 under Article 19 of the SFDR which has so far included two consultations (one public and one targeted), several technical workshops with industry groups and engagement with Members States, supervisors and representatives of civil society (read more of our coverage here). The Commission’s 2025 work plan has scheduled revision of the SFDR for Q4 2025 and no further consultations after this Call for Evidence. 

The Commission identifies the challenges of the existing framework 

In the Call for Evidence, the Commission identifies that there have been challenges and undue operational costs which have arisen from implementation of the SFDR framework arising from a lack of clarity around key concepts, overlaps and inconsistencies with other part of the sustainable finance framework, limited relevance of some disclosure requirements and issues with data availability. SFDR disclosure often does not provide clarity and comparability of different financial products offered to investors in the EU and this has resulted in a risk of greenwashing and “the unwarranted exclusion of some sectors because of how some rules are applied in practice”. 

We note that “the excluded sectors” are probably referring to mobilising finance for the transition to sustainable business practices and investment in defence (and which is specifically noted later in the Call for Evidence). The European Parliament recently highlighted the importance of improving access to finance for the defence industry and highlighted that despite the EU sustainable finance framework not imposing any limitations on financing the defence sector, the application of the EU Taxonomy and SFDR has been highlighted by market participants as a barrier to defence investment. 

Revising the SFDR to address the feedback 

Previous consultations on the SFDR have identified support for the broad objectives of the SFDR whilst acknowledging limitations and barriers to achieving the objectives of the framework. 

The Commission has found broad support for a simplification and revision of the SFDR that would cater for different investor groups and types of financial products, help retail investors to understand investment products, address the international reach and exposures of investments and “help to direct investment towards diverse sustainability-oriented aims while avoiding greenwashing (including not only activities which are already green but also investments in companies which are at earlier stages of the transition, and investments that support other objectives such as security)”. To this end, the review of the SFDR should aim to clarify the framework for both financial market participants and end-investors. 

The Commission has clearly listened to the stakeholders, including the financial regulators and Member States, and sets out that the revision of the SFDR should entail: 

• a simplification of key concepts 
• focussing on giving investors the most essential information by streamlining and reducing disclosure requirements. The Commission suggests possible targeted changes and clarifications to the existing disclosures 
• considering categorising financial products that make sustainability-related claims. The SFDR framework has long been used as a de facto labelling regime although designed as a disclosure regime. Many market participants have suggested that a sustainable products labelling regime would be useful alongside the disclosure regime and the UK has recently introduced a framework designed in this way – no doubt shaped by the experience with, and suggestions made about, the SFDR framework. In the Call for Evidence, the Commission suggests the possible “establishment of a number of categories reflecting different sustainability objectives of financial products, underpinned by common criteria (e.g. products contributing to a sustainability objective, products contributing to the transition, or products contributing to other ESG strategies)” 

Next Steps 

The feedback period for the Call for Evidence runs until 30 May 2025. We expect that the proposals for the revision of the SFDR will follow the finalisation of the omnibus simplification package proposals in Q4 2025 to ensure that the revision of the SFDR is consistent with the changes agreed under the EU Taxonomy and the Corporate Sustainability Reporting Directive. 

Our global Sustainable Finance & Investment group brings together a multidisciplinary global team that provides clients with best-in-market support. We are following developments relating to the ESG regulation, so please get in touch if you would like to discuss. 

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This note is intended to be a general guide to the latest ESG developments. It does not constitute legal advice.

Authored by Rita Hunter and Emily Julier.