European Parliament Proposals - Rapporteur for the European Parliament's draft report
Photo credit: Lukas S. / Unsplash+
On 28 April 2026, the Rapporteur for the European Parliament published his draft report setting out the Parliament’s initial proposals to the European Commission’s review of the Sustainable Finance Disclosure Regulation (known as SFDR 2.0) published in November 2025 (which we covered here).
The Rapporteur’s proposals will be tabled to the European Parliament’s Economic and Monetary Affairs Committee over the summer, before being voted on by the European Parliament’s MEPs in the autumn.
Whilst the Rapporteur’s proposals adopt the Commission’s revised architecture for SFDR 2.0 (including the proposed new labelling framework), the proposals include a number of key changes that would tighten the regime for asset managers. Unhelpfully, the proposals do not include a carve out for funds marketed only to professional investors (which was included in the Commission’s leaked draft proposals and subsequently dropped in the final published proposals).
It is important to note that the Rapporteur’s proposals will be subject to further debate and revision as they move through the ordinary European legislative process, and so are by no means set in stone. However, the proposals do indicate an appetite within Europe for tightening parts of the proposed SFDR regime.
Key changes relevant for asset managers include:
- Mandatory PAIs. Under the Commission’s current proposals, managers of Article 7 (Transition) and Article 9 (Sustainable) funds may decide which sustainability-indicators to use as part of identifying and disclosing the principal adverse impacts of their investments on sustainability factors (a seemingly more flexible approach than the current regime which mandates specific PAI indicators). The Rapporteur’s proposals harden this requirement so that managers must use a mandatory set of PAIs , disclose other PAIs which are material for the investment as well as voluntarily disclose other principal PAIs that may be relevant.
- SafeharboursUnder the Commission’s proposals, funds where at least 15% of investments are in Taxonomy-aligned economic activities will be deemed to meet the Article 7 (Transition) and Article 9 (Sustainable) investment requirements (otherwise set at 70% investments threshold). The report proposes increasing this Taxonomy-alignment safe harbour threshold from 15% to 20%. The report also proposes deleting the Commission’s safe harbour proposals for Article 7 and Article 9 funds that are managed in alignment with the EU climate transition or EU Paris-aligned benchmark.
- Under the Commission’s proposals, funds where at least 15% of investments are in Taxonomy-aligned economic activities will be deemed to meet the Article 7 (Transition) and Article 9 (Sustainable) investment requirements (otherwise set at 70% investments threshold). The report proposes increasing this Taxonomy-alignment safe harbour threshold from 15% to 20%.
- The report also proposes deleting the Commission’s safe harbour proposals for Article 7 and Article 9 funds that are managed in alignment with the EU climate transition or EU Paris-aligned benchmark.
- ESG Basics (Article 8). The report proposes that ESG Basics funds that invest with reference to an ESG rating that outperforms the investment universe (this is one of the examples of when a fund can fall into this category) should eliminate the bottom 20% of their investment universe.
- Requirement to disclosure engagement strategy. The report proposes introducing a new requirement for managers of Article 7, 8 and 9 funds to describe their engagement strategy and its alignment with the fund’s objectives or explain why an engagement strategy is not pursued.
- ‘Other investment’ bucket. Under the Commission’s revised Article 7, 8 and 9 product categories, a fund’s investments must be an ‘eligible investment’ (as listed by each category). The Commission’s proposals included an ‘other investment’ bucket for each category so that investments that do not meet one of the listed ‘eligible investments’ may still fit the product category provided that proper justification is provided. The report proposes tightening this proper justification, such that the explanation of how the investment contributes to the investment theme must be in light of the other eligible investment options listed for each respective category. This may make it harder for existing lighter green Article 8 funds to adopt the ESG Basics/Article 8 label under SFDR 2.
- New anti-greenwashing statement. The report proposes that Article 6a funds (unclassified funds) referencing ESG factors must include a prominent statement that the fund does not meet the EU standards for defining sustainable financial products and protecting against greenwashing in SFDR disclosures.
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Author: Eve Ellis
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Ropes & Gray LLP
Ropes & Gray LLP
