Perspectives · Sustainability
The SFDR review is a proposal, and a data question either way
The European Commission adopted its proposal to revise the Sustainable Finance Disclosure Regulation on 20 November 2025 and announced it the following day. It would replace the current disclosure architecture with three voluntary product categories, sustainable, transition and ESG basics, each requiring 70 per cent of the portfolio to support the chosen strategy; it would also drop the firm-level principal adverse impact disclosure and reserve ESG wording in product names for categorised products. The Parliament and the Council have not agreed a text, the categories may still change, and nothing in the proposal is in force. What does not change is where a classification sits: on a named fund vehicle, measured against that vehicle's holdings. This perspective is general information, not legal advice.
9 March 2026 · Sustainability
The proposal
Three voluntary categories, a rule about names, and no law yet
The Commission's proposal moves away from disclosure regimes that the market turned into product labels. In their place it sets out three voluntary categories: sustainable, for products contributing to a sustainability goal; transition, for products invested in companies making credible improvements; and ESG basics, for products applying an ESG approach that does not meet the other two standards. A product that takes no category makes no category claim.
Two further limbs matter to a fund's paperwork. Financial market participants would no longer have to publish, at firm level, how they consider the principal adverse impacts of investment decisions on sustainability factors. And ESG or sustainability wording in a product's name and marketing material would be reserved for categorised products, which brings the fund's own name inside the regulatory perimeter.
None of it is law. This is a Commission proposal under the ordinary legislative procedure: the Parliament and the Council each have to reach a position, negotiate and agree a final text, and a threshold, a category name or the treatment of principal adverse impacts can move at any point along the way. No manager can classify a fund under the new categories today, because the categories do not yet exist in law. Meanwhile the current regulation applies in full. Articles 6, 8 and 9 disclosures, the periodic reporting annexes and the existing principal adverse impact statements remain obligations until a revising text is adopted and applies, and any plan that treats the proposal as a countdown is planning against a document that can still be rewritten.
The vehicle
What a classification attaches to
A manager holds a sustainability position. A fund holds assets. The proposal's 70 per cent test is measured against the holdings of a particular product, so the answer can differ between two funds run by the same team on the same investment thesis, and can differ again between a master fund and a feeder, or between a fund and the parallel vehicle that carries a different investor base and a slightly different mandate.
Structures make that worse in a specific way. The legal name on the constitutional document, the name in the prospectus, the name used in marketing decks and the name recorded in the entity register are four separate facts, and in many houses they have quietly drifted apart. Where a share class carries ESG wording that the fund's own documents do not support, the naming limb of the proposal is a problem waiting for a text to attach to.
So the work that survives every version of this file is reconciliation. For each vehicle and each share class, hold one authoritative legal name, the names used in the prospectus and in marketing, the current SFDR classification, the document that evidences it and the person who owns the answer. Where those disagree, the disagreement is a finding now, well before a trilogue. Fund names are already regulated in the European Union: ESMA's guidelines on funds' names using ESG or sustainability-related terms have applied since 21 November 2024, with funds existing at that date given until 21 May 2025 to comply or change name, and they set an 80 per cent threshold for investments meeting the characteristics or objectives the name promotes. A manager who cannot list today which of its funds use such a term is already behind guidelines that bind it, never mind a proposal that might.
In Alethia
One record of the vehicle, its name and its evidence
In Alethia a fund's legal name, its share classes and the constitutional and offering documents attached to it sit in one place, next to the ownership, the officers and the mandates. The question "what is this vehicle actually called, and which document says so" has a single answer, with a date and an author against it.
Sustainability classification can be carried as a compliance obligation on the vehicle, with a due date and an owner, and the supporting document attached to the entity the obligation belongs to. No portfolio threshold is calculated here and nothing is filed with a regulator. The obligation the register does take on is narrower: when the text finally lands, whoever has to apply it starts from a list of vehicles and names that is already current, and can see who last changed each one.
Questions
What the proposal would change
Do we need to classify our funds under the new categories now?
No. The categories exist only in a Commission proposal. Until the Parliament and the Council agree a text and it applies, there is nothing to classify under, and the existing Article 8 and Article 9 disclosures continue.
Is the 70 per cent threshold settled?
It is the figure in the Commission's proposal. Thresholds are among the most negotiated parts of a file like this one, and it may be amended, qualified or defined differently before any final text.
If entity-level principal adverse impact disclosure goes, does the data work go too?
Not necessarily. The proposal would remove one firm-level publication. Product-level obligations, investor due diligence questionnaires and side-letter commitments made to limited partners are separate sources of the same requests, and they do not fall away with a Commission proposal.
The names are governed already
Hold one authoritative legal name, one classification and one supporting document for each fund and share class, so that whichever version of the regime arrives, the register already answers the questions it asks.