ESG: changes to SFDR - a Simmons client briefing note

On 20 November 2025, the European Commission adopted a highly-anticipated legislative proposal, which would represent a complete overhaul of the existing SFDR regime - a revolution, not an evolution, for the current rules.

These changes include (among other things):

• removing the current article 8 / article 9 regime, with no specific grandfathering regime and its replacement with three mandatory product categories.
• the current Principal Adverse Impact (PAI) regime will also be removed, at both management entity level and product level.
• new naming and marketing restrictions will be embodied in SFDR, relating to use of sustainability terminology.

To guide clients through these changes, Simmons & Simmons have prepared a client note “SFDR 2: an ESG earthquake is on its way”.

The briefing note covers the Top 10 key topics:

1. What’s the context to the reform of SFDR?
2. Key changes under SFDR 2 – manager level
3. Key changes under SFDR 2 – fund level
4. Three new product categories (new article 7/8/9) – general structure
5. Three new product categories (new article 7/8/9) – detailed focus
6. “Combined” product category (new Article 9a)
7. Other funds – significant restrictions on promotion of sustainability (new article 6a)
8. Other important points to note
9. Exemptions and transitional provisions
10. Next steps