The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has adopted its position on the review of the Sustainable Finance Disclosure Regulation (SFDR), proposing to narrow the scope of the framework and allow companies expanding fossil fuel production to qualify under the ‘transition’ fund category.
The SFDR serves as the European Union’s primary regulatory rulebook governing how financial products disclose environmental and social performance. ECON’s position introduces an exemption similar to one proposed by the European Council in June, which would relieve investment firms from disclosing SFDR categorisations for financial products sold exclusively to professional investors, including smaller regional pension schemes.
Under the committee’s proposed transition fund criteria, fossil fuel producers expanding coal, oil, or gas operations could be included provided they meet specific investment thresholds. The position adopts a Council proposal requiring fossil fuel entities to direct at least 20 per cent of annual capital expenditure towards green activities aligned with the EU Taxonomy. However, ECON introduced a condition requiring these companies to invest a greater share of capital into green activities than into new fossil fuel projects over a three-year rolling period.
Key policy updates within the ECON position include:
- Reporting Transparency: A new requirement for investment management firms to publish annual disclosures detailing the proportion of their total assets under management falling within each SFDR category.
- Scope Reduction: Exemptions for professional investor products designed to reduce administrative requirements across institutional sales.
- Trilogue Mandate: The position forms ECON’s negotiating mandate ahead of inter-institutional trilogue discussions between the European Parliament, European Council, and European Commission, expected to begin in October.
Thibault Girardot, Sustainable Finance Policy Officer at WWF EU, stated: “Climate science is largely absent from ECON’s position. They have narrowed who the rules apply to and loosened what counts as a credible transition to sustainability. This undermines what the SFDR is meant to achieve and puts Europe’s sustainability goals at risk.”
Girardot added: “Companies opening new oil and gas fields or building new coal plants have no place in a category designed to help Europe shift to a sustainable economy. The SFDR is meant to reduce greenwashing, but if policymakers continue on the current trajectory, it will only make it harder for investors to identify companies moving away from coal, oil and gas.”
