A new proposal allowing alternative investment funds to sidestep the EU’s Sustainable Finance Disclosure Regulation (SFDR) could fracture sustainability reporting for institutional investors, warns the European Sustainable Investment Forum (Eurosif).
The warning lands as EU lawmakers push to streamline sustainability rules, raising concerns the simplification effort may undermine its original purpose.
Aleksandra Palinska, Eurosif’s executive director, questioned the direction during the PRI in Person conference in Amsterdam. “Simplification should create the framework more effective and simpler to implement, not weaken its objectives or create new uncertainty,” she said.
The European Parliament adopted its negotiating position in September. Under that stance, alternative funds marketed solely to professional investors could opt out of the SFDR categorisation framework entirely.
Consequently, institutional investors would likely depend on separately negotiated disclosures. Comparing sustainability approaches across managers would become significantly harder.
Trilogue negotiations involving the Parliament, the Council of the EU and the European Commission begin 22 October. A final agreement could remain elusive until the end of 2026.
Meanwhile, Erika Blanckaert, senior public affairs manager at Invest Europe, noted fund managers would still need to share sustainability information through existing reporting channels and LP-GP disclosure agreements.
Sigita Zvirblyte, head of sustainability at Livonia Partners, pushed back from the audience. Without clear regulatory guidance, large limited partners will impose their own standards. Managers could face multiple reporting templates and conflicting metric calculations.
Blanckaert also challenged whether proposed fund categories reflect how private-market funds actually operate. The 70% alignment threshold remains ambiguous during investment and divestment phases, she added.
Corporate reporting cuts would force investors to fill gaps using estimates, external data providers, and direct company engagement, according to Mathilde Dufour, chief sustainability officer at Mirova. Building internal expertise becomes essential.
Raoul Köhler of the Dutch AFM warned transition funds might deliver “paper decarbonisation rather than real-world decarbonisation.” Product providers must scrutinise company transition plans, not just portfolio emissions.
PensionsEurope has also urged greater flexibility for pension funds under SFDR 2.0, distinguishing member communications from investor marketing.
The outcome of October’s negotiations will determine whether Europe’s sustainability disclosure regime preserves coherence or splinters into competing private standards.
