COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT accompanying the Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR), Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) and repealing Commission Delegated Regulation (EU) 2022/1288
Date: 2025-11-20
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: consumer information, disclosure of information, financial legislation, financial occupation, financial risk, financial services, insurance, regulation of investments, risk management, sustainable finance

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   EUROPEAN COMMISSION  Brussels, 20.11.2025  SWD(2025) 839 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  accompanying the Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR), Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) and repealing Commission Delegated Regulation (EU) 2022/1288          {COM(2025) 841 final} - {SEC(2025) 841 final} - {SWD(2025) 838 final}  
 
 
Impact  assessment  on  the  review  of  Regulation  (EU)  2019/2088  on  sustainability-related  disclosures  in  the 
financial services sector (SFDR) 

Executive Summary Sheet 

Why? What is the problem being addressed?  

A. Need for action 

The Sustainable Finance Disclosures Regulation (SFDR) has been in application since March 2021. It 
is  part  of  a  broader  package  of  sustainability  disclosure  rules  for  financial  markets  designed  to  help 
deliver  on  the  objectives  of  the  Green  Deal,  including  the  Taxonomy  Regulation  and  the  Corporate 
Sustainability  Reporting  Directive.  The  SFDR  sets  out  how  financial  market  participants  should 
disclose sustainability information to investors, in order to help the latter make informed choices about 
their investments.  

Stakeholder  feedback  suggests  that,  while  the  SFDR  has  helped  increase  transparency  regarding 
environmental,  social  and  governance  (ESG)  aspects  related  to  investments,  it  is  also  complex  to 
implement, and it is challenging for investors to use of the disclosures. These shortcomings have led to 
challenges and undue costs for financial market participants in applying the rules, and to difficulties for 
investors to understand and compare ESG products amid confusion over the unintended and misleading 
use  of  the  SFDR  disclosures  as  de  facto  product  labels,  but  without  common  criteria  fit  for  this 
purpose.  The  problems  lead  to  risks  for  investor  protection,  the  efficient  functioning  of  the  single 
market, and the competitiveness of the EU financial sector.  

What is this initiative expected to achieve?  

In  order  to  boost  investments  for  Europe’s  sustainable  prosperity  and  competitiveness,  the  initiative 
aims to ensure proportionate requirements for Europe’s financial sector, protect the integrity of the EU 
single market, and help investors to seize opportunities in sustainability-linked financial products. The 
impact  assessment  explores  how  best  to  simplify  and  reduce  sustainability-related  administrative 
requirements for financial market participants under the SFDR while enhancing coherence with the rest 
the framework, as well as to improve end-investors’ ability to understand and compare ESG financial 
products.  

What is the value added of action at the EU level?  

EU level action to revise the framework would be conducive to more harmonised, effective, efficient 
and  coherent  outcomes  across  the  single  market.  In  contrast  to  the  status  quo  or  relying  on  national 
level  actions  to  address  the  shortcomings,  an  initiative  at  EU  level  could  simplify  requirements  and 
disclosures across the board for the benefit of financial market participants and investors and address 
data challenges  across the EU. This  would better  help  scale up private sustainable finance across  the 
EU, in support of common strategic objectives of the green transition. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  

The  main  options  explore  how  to  (i)  alleviate  SFDR-related  reporting  burdens  via  changes  to  entity-
level and product level disclosures and concepts for financial market participants, and (ii) set up a clear 
categorisation system to improve investors’ understanding of ESG products. The options are weighed 
against  the  need  to  ensure  consistency  with  the  rest  of  the  sustainable  finance  framework,  and  in 

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particular  with  the  changes  entailed  by  the  Omnibus  proposals  in  terms  of  sustainability  disclosures 
applicable  to  corporates1,  as  well  as  to  recognise  and  build  upon  current  market  practices2.  The 
preferred  options  are  to  remove  the  majority  of  entity-level  disclosures  under  the  SFDR  and  to 
significantly  reduce  product  disclosures,  including  by  way  of  introducing  a  three-way  ESG  product 
categorisation  system  to  streamline  and  simplify  requirements  for  financial  market  participants  and 
help provide investors with essential and comparable information regarding categorised products. This 
combination of the preferred options, to be subsequently specified in limited implementing legislation, 
is  assessed  to  deliver  significant  simplification  and  clarity  for  markets,  provide  sufficient  stability 
compared  to  current  market  practices  and  flexibility  to  continue  encouraging  diversity  in  product 
innovation, as well as ensure a high level of investor protection. 

Who supports which option?  

Financial market participants welcome the deletion of entity-level disclosures in the SFDR, while the 
views  of  others  (NGOs,  national  competent  authorities)  are  more  mixed.  Most  stakeholder  groups 
largely  agree  that  changes  to  product-level  disclosures  are  also  warranted  and  should  focus  on  more 
meaningful  and  comparable  indicators.  Finally,  all  stakeholders  broadly  welcome  a  categorisation 
system for ESG products at EU level notably to help comparability for investors.  

What are the benefits of the preferred option?  

C. Impacts of the preferred option 

The  preferred  options  are  assessed  to  considerably  simplify  requirements  and  reduce  administrative 
costs  linked  to  the  SFDR.  The  removal  of  entity-level  disclosures  would  alone  eliminate  burdens 
estimated to account for 25% of the costs under the current rules. The three-way categorisation would 
help  simplify  product  disclosures,  contribute  to  coherent  rules  for  the  distribution  of  ESG  products, 
lower  risks  of  divergent  national  practices,  and  boost  comparability  for  investors  by  providing  them 
with more meaningful product information. This is expected to help scale up investment toward greater 
sustainability  across  the  board.  Given  the  dominant  size  of  the  EU  market  in  this  area,  the 
categorisation regime can also be expected to contribute to attracting further inward investment flows 
into the EU. However, a quantification of the full benefits from the introduction of categories, and from 
reduced  product  disclosures,  has  not  been  possible  yet  at  this  stage,  given  that  several  details  would 
need  to  be  developed  in  level  2  implementing  legislation,  including  after  more  extensive  consumer-
testing.  Scaling  up  sustainable  finance  also  hinges  on  other  economic  factors,  involving  the  efficient 
functioning  of  markets  and  determining  capital  allocation,  which  are  beyond  the  scope  of  the  SFDR 
review.  

What are the costs of the preferred option? 

For a majority of market players, notably for funds, the costs would largely be minimised by the fact 
that the preferred option of a three-way categorisation scheme would build on current practices and on 
the already applicable ESMA guidelines (see footnote 2). The initial costs should also be offset against 
the  simplification  measures  and  lower  costs  linked  to  reduced  disclosures  over  the  medium  to  long 
term.  

For others, notably insurance and pensions products which have not already incurred costs linked to the 
changes imposed by the ESMA guidelines, the new categories can involve an initial cost in the short 
term.. However, little reliable quantitative data is available at this stage. The rules could nonetheless be 

1 Omnibus I - European Commission 
2 Namely reflecting the  guidelines for funds’ names by the European Securities and Markets Authority, which 
have introduced minimum criteria for the use of sustainability-linked names by funds.   

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suitably phased for them, to mitigate costs.  

How will businesses, SMEs and micro-enterprises be affected?  

Financial market participants, many of whom are SMEs, are expected to see lower  compliance costs, 
lower  barriers  to  market  entry,  and  economic  benefits  of  continued  investment  flows  according  to  a 
simpler, clearer and more intuitive categorisation of products. In turn, increased funding toward private 
sustainability-oriented  innovations  in  the  real  economy  can  be  expected,  supporting  the  flow  of 
additional private capital toward the twin green and digital transitions and EU competitiveness goals.  

Will there be significant impacts on national budgets and administrations?  

N/A 

Will there be other significant impacts?  

No 

When will the policy be reviewed?   

D. Follow up 

The initiative would be monitored in the context of existing processes underway with the help of the 
European  Supervisory  Authorities  and  the  Platform  on  Sustainable  Finance,  a  Commission  expert 
group. The Commission will evaluate the initiative in accordance with its better regulation principles. 

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