SFDR 2.0 – ECON agrees negotiating position with stricter fossil fuel test
Published 22 September 2026
Category: Impact and ESG
As described in one of our previous updates, on 26 June 2026, the Council of the European Union agreed its negotiating position on the proposed amendments to the Sustainable Finance Disclosure Regulation (“SFDR”) on 24 June 2026. The Council’s position introduced several important clarifications including three new categories of financial products: (i) sustainable (ii) transition (iii) ESG basics and proposed to remove the Commission’s proposed exclusion of fossil fuels from the transition category provided that a minimum of 20% of the company’s capital expenditure is allocated to EU-Taxonomy-aligned activities and that the company pursues a clear and time-bound strategy for reducing greenhouse gas emissions.
On 10 September 2026, the European Parliament’s Committee on Economic and Monetary Affairs (“ECON”) voted on its negotiating position on the proposed amendments to the SFDR.
ECON backed the Commission’s proposal, as also supported by the Council, for three standard product categories. Unlike the Council, however, ECON insists that transition products channeling investments towards companies that are not yet sustainable, should exclude those earning revenue from fossil fuel exploration, extraction, mining or refining, unless such companies (i) invest heavily in environmentally sustainable activities, (ii) have a measurable, time-bound plan to cut emissions and (iii) put more capital into sustainable activities than into new fossil fuel projects. ECON’s position is thus materially stricter than the Council’s.
ECON further proposes that products falling under the ESG basics category should also disclose their exposure to the fossil fuel sector. In addition, all three categories should exclude investments in companies violating human rights and humanitarian law.
The press release is available here.
Next steps:
ECON’s negotiating mandate will be announced at the start of the October I plenary session. Once the European Parliament has formally adopted its position, trilogue negotiations between the Parliament, the Council and the Commission can begin.
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