SFDR 2.0: Parliament adopts its negotiating mandate as trilogues get the green light

In the latest stage on the journey of SFDR 2.0 through the EU legislative process, the European Parliament's ECON Committee has adopted its report on the review of the Sustainable Finance Disclosure Regulation and approved the mandate to open trilogue negotiations with the Council. Parliament has now announced its mandate, with the first trilogue meeting between Parliament, Council and the Commission expected to take place shortly in October. Co-legislators are aiming to reach political agreement by the end of 2026, with formal adoption and publication in the Official Journal to follow; based on an anticipated 18 to 24-month transition period, the rules are expected to go live at the end of 2028 or in early 2029.

Overall, Parliament broadly supports the Commission's three-category product framework (Sustainable, Transition and ESG Basics) and the architecture around it, but introduces a number of targeted adjustments – most notably on fossil fuel exposures, Taxonomy-alignment thresholds and the treatment of public-sector debt. On a number of the most contested points, the amendments adopted by ECON move Parliament's position materially closer to the Council's negotiating mandate of 24 June 2026 (including proposals to increase the implementation period to 2 years, include an opt-out for AIFs marketed only to Per Se Professionals and proposals around grandfathering of existing closed funds, and ramp up periods for Article 7,8,9 products to meet the 70% eligible investment threshold) which should help narrow the scope of the trilogue discussions to focus on key areas of divergence.

Key points of Parliament's mandate

• Three-category framework confirmed. Parliament endorses the Commission's architecture built around Transition (Art. 7), ESG Basics (Art. 8) and Sustainable (Art. 9) products. In line with the Commission draft, products in each category must disclose their PAIs, with additional safeguards aimed at preventing greenwashing.

• Transition category – tighter fossil fuel gating. Parliament adopts a more restrictive approach than the Council for fossil fuel-related exposures. To qualify, fossil fuel companies must allocate at least 20% of CapEx to Taxonomy-aligned activities, have a Paris Agreement-aligned emissions reduction plan and, where relevant, maintain a time-bound coal phase-out strategy. In addition, qualifying companies must, over a rolling three-year period, allocate a greater share of CapEx to Taxonomy-aligned activities than to new fossil fuel expansion.

• Higher Taxonomy threshold for Sustainable products. Unlike the Council, which applies a single 15% Taxonomy-alignment threshold to both the Sustainable and Transition categories, Parliament requires 20% Taxonomy alignment for Sustainable products while maintaining 15% for Transition products – a point of divergence that will need to be reconciled in trilogues.

• Public-sector bonds – partially accommodated. Parliament allows general-purpose public-sector bonds to contribute towards the Transition category threshold, subject to specific conditions and capped at 15 percentage points. Such instruments remain excluded from the Sustainable category, which is reserved for use-of-proceeds instruments such as green bonds. The 15-percentage-point cap for the Transition category broadly aligns with the approach taken by the Council.

• Targeted simplification measures. Parliament aligns with the Council on a 24-month application period following entry into force, but proposes that the removal of certain entity-level disclosures – including principal adverse impact statements and remuneration-related disclosures – should apply immediately on entry into force in order to accelerate reporting-burden relief.

Next steps

The first trilogue meeting is scheduled for later this month (perhaps as early as 13th October). Co-legislators are targeting political agreement by the end of 2026, after which the text will go through legal-linguistic finalisation and formal adoption by Parliament and Council before publication in the Official Journal. We will continue to track developments as the trilogue negotiations progress and will post further updates as technical and political landing zones emerge 

Our commentary on the European Commission's November 2025 proposal can be found here, and our note on the Council's negotiating mandate of 24 June 2026 is available here. A link to the ECON compromise text is available here: