Trying to keep up with the ever-changing world of sustainable finance requires staying informed about a variety of key regulatory frameworks. This article aims to help you with that, providing you with a concise overview of the recent updates, future timelines, and expected changes within SFDR, CSRD, SDR, and EU Taxonomy, so you can feel more prepared. From improved disclosure requirements and streamlined reporting processes to global alignment efforts, understanding these developments is crucial for businesses and investors alike.

SFDR

The Sustainable Finance Disclosure Regulation (SFDR) has undergone some significant updates recently aimed at enhancing transparency and accountability in the financial sector. As the demand for sustainable investment options grows, these changes are designed to ensure that funds accurately represent their environmental and social characteristics. Keep reading for an overview of the recent updates to SFDR, including enhanced disclosure requirements, regulatory technical standards, and a future timeline for further revisions.

Recent Updates

Enhanced Disclosure Requirements

Funds using ESG-related terms must now ensure that at least 80% of their investments align with environmental or social characteristics or sustainable objectives. Article 8 and Article 9 funds face stricter rules, including measures to prevent greenwashing and ensure greater transparency.

Regulatory Technical Standards (RTS)

The SFDR Level 2 RTS came into effect on January 1st, 2023, introducing detailed disclosure requirements and mandatory templates for reporting sustainability impacts. Updates to the Delegated Regulation were adopted by the European Commission in 2024, with implementation having already started in January 2025.

Mid-2025 Review

A thorough review of the SFDR framework is scheduled for mid-2025. This assessment will gather feedback from stakeholders and supervisory authorities, potentially leading to further legislative changes.

Principal Adverse Impacts (PAI)

Reporting on PAIs under Article 18 remains a key priority. Annual disclosures are required by June each year, covering data from the previous calendar year.

Future Timeline

In addition to all of those changes above, SFDR is currently undergoing even more revisions to address challenges such as greenwashing, inconsistent definitions, and regulatory complexity. Here’s a brief timeline of upcoming changes and milestones, so you know what to expect:

2025

Q3 2025: The European Commission is to conduct a review of the SFDR framework, with input from the European Supervisory Authorities (ESAs), focusing on alignment with the EU Taxonomy and addressing stakeholder concerns.

Q4 2025: Draft text for SFDR 2.0 is expected to be released for consultation. Some proposed changes include replacing Article 6, 8, and 9 classifications with new categories such as "Sustainable Products," "Transition Products," and "ESG Collection Products". In addition to this, we should expect the Introduction of simplified disclosures and sustainability labels to enhance clarity and comparability for investors, as well as the potential mandatory reporting of Principal Adverse Impacts (PAIs) for sustainable funds.

2026

H1 2026: Deadline for the feedback from consultations on SFDR 2.0 revisions to be incorporated into legislative proposals.

H2 2026: When we’ll hear the first reading of SFDR amendments in the European Parliament and Council.

2027

Mid-2027: The planned final adoption of SFDR 2.0 by the European Parliament and Council.

2029

July 2029: SFDR 2.0 is expected to become fully effective, including new product classifications, enhanced disclosures, and alignment with other EU sustainability regulations.

Key Changes Expected

New Product Categories

The current Article 6, 8, and 9 classifications will be replaced with four clearer categories: Sustainable Products, Transition Products, ESG Collection Products, and Unclassified Products.

Alignment with EU Taxonomy

Product classifications will more closely align with EU Taxonomy criteria, ensuring greater consistency across the board.

Simplified Disclosures

Pre-contractual and periodic disclosures will be streamlined to reduce administrative effort while maintaining transparency for all stakeholders.

Introduction of Labels

New labels, such as "Sustainable" or "Transition," will help investors easily identify and understand the sustainability profile of products.

Mandatory PAI Reporting

Standardised metrics for Principal Adverse Impacts to improve comparability across funds classified as sustainable.

CSRD

The Corporate Sustainability Reporting Directive (CSRD) represents a significant step forward in enhancing sustainability transparency across the European Union. With recent updates and adjustments, the directive aims to balance rigorous reporting requirements with practical measures to try and help reduce administrative burdens. Keep reading to learn more about the key changes being made, including postponed timelines, simplification measures, assurance requirements, and digital reporting enhancements, alongside a future timeline for full implementation. 

Recent Updates

Postponements via Omnibus Proposal

On April 3rd, 2025, the European Parliament approved a delay in the implementation of the CSRD for certain companies as part of the Omnibus simplification package. This decision aims to ease administrative pressures while staying committed to sustainability objectives.

Under the revised timeline, large companies will now begin reporting on their 2027 financial year, with reports due in 2028. Listed small and medium-sized enterprises (SMEs) will follow one year later, reporting on their 2028 financial year with submissions due in 2029.

Simplification Measures

The Omnibus proposal introduces significant reductions in reporting requirements - 25% for large companies and 35% for SMEs. Adjustments to the European Sustainability Reporting Standards (ESRS) include a phased rollout of sector-specific reporting and simplified requirements for smaller entities.

Assurance Requirements

Limited assurance obligations remain in place but will be phased in gradually, supported by clearer audit guidelines to ensure a smooth transition.

Digital Tagging Challenges

While digital tagging using XBRL remains mandatory, new exemptions have been introduced to address technical challenges and ease the implementation process.

Future Timeline

2027

Early 2027: Large companies (1,000+ employees) are due to begin reporting under CSRD, covering the 2027 financial year.

2028

Early 2028: First sustainability reports for large undertakings are due, covering data from the 2027 financial year, and listed SMEs and non-EU parent companies with substantial EU activity will begin reporting under the CSRD.

2029

Early 2029: First sustainability reports for listed SMEs and non-EU parent companies are due, covering data from the 2028 financial year.

Mid-2029: The deadline for full implementation of CSRD across all applicable entities, as well as sector-specific ESRS to be fully phased in.

Key Changes Expected

Scope Adjustments

The revised thresholds under the CSRD will reduce the number of companies required to report, exempting smaller businesses from unnecessary compliance burdens. This adjustment aims to strike a balance between meaningful sustainability reporting and reducing administrative strain.

Sector-Specific Standards

Industry-specific ESRS will be introduced gradually, providing tailored reporting requirements that better reflect the unique needs and challenges of different sectors.

Streamlined Reporting for SMEs

Simplified reporting frameworks will give SMEs greater flexibility in meeting compliance requirements, while ensuring proportional and manageable reporting standards.

Digital Reporting Enhancements

Digital tagging requirements are being refined to address technical challenges and improve the usability of sustainability data, making it easier for stakeholders to access and analyse key information.

SDR

The UK's Sustainable Disclosure Requirements (SDR) framework is undergoing significant updates to improve transparency, fight greenwashing, and align with global sustainability standards. Recent developments include the introduction of anti-greenwashing rules, voluntary sustainability labels, and the upcoming UK Sustainability Reporting Standards (UK SRS). Efforts are also underway to integrate net-zero transition plans and develop a UK Green Taxonomy to define sustainable activities. These changes aim to streamline reporting, support credible ESG claims, and ensure businesses are well-prepared for changing regulations, so keep reading to ensure you’re up to date.

Recent Updates

Anti-Greenwashing Rule

Since May 31st 2024, new regulations require that all sustainability-related claims be fair, clear, and backed by solid evidence. This rule aims to ensure transparency and prevent misleading statements about ESG credentials.

Voluntary Labelling

As of July 31st 2024, voluntary sustainability labels are now available for financial products. These labels are designed to help consumers and investors easily identify credible ESG-focused offerings in the market.

UK Sustainability Reporting Standards (UK SRS)

The UK is finalising its UK SRS, which align with global ISSB standards (IFRS S1 and S2). Expected in Q1 2025, these standards will provide clear guidance for companies on disclosing sustainability-related information.

Transition Plan Taskforce (TPT)

The Transition Plan Taskforce is developing a framework to help companies publish effective net-zero transition plans. A consultation on incorporating this framework into the UK’s SDR is expected alongside the rollout of the UK SRS.

UK Green Taxonomy

Work is underway on a UK Green Taxonomy to define sustainable activities. Consultations are ongoing throughout 2024, with a voluntary testing phase planned before any mandatory requirements are introduced.

Future Timeline

2025

Q1 2025: The finalisation and endorsement of UK SRS is expected.

Q2 2025: There will be an FCA consultation on applying the UK SRS to listed companies, as well as a decision on extending requirements to non-listed companies.

H2 2025: There will be a consultation on mandatory disclosure requirements under the UK Green Taxonomy.

2026

Jan 1st 2026: The earliest effective date for mandatory reporting under the UK SRS for accounting periods starting in 2026.

2027-2028

A full implementation of SDR across listed and non-listed entities, depending on the outcomes of the consultations mentioned above.

Key Changes Expected

Mandatory Reporting

Listed companies are expected to begin reporting under the UK SRS starting with their FY26 reports, which will be due in 2027. Non-listed companies may also be required to comply, depending on decisions expected in Q2 2025.

Transition Plan Integration

Businesses will need to publish net-zero transition plans that align with the TPT Framework and ISSB climate standards, ensuring consistent and credible disclosures.

Green Taxonomy Testing

The UK Green Taxonomy will initially be introduced on a voluntary basis, allowing companies to test disclosures before any mandatory requirements are implemented.

Global Alignment

The SDR framework is designed to align with global standards, such as the ISSB and EU regulations, hopefully making it easier for multinational businesses to meet compliance obligations across jurisdictions.

EU Taxonomy

The EU Taxonomy is changing to better support sustainable finance by simplifying reporting processes, expanding its scope, and improving global alignment. Recent updates include streamlined reporting templates, revised technical screening criteria, and the addition of new activities to reflect technological advancements. Companies are now required to report their eligibility under all six environmental objectives, with alignment reporting becoming mandatory in 2025. Efforts to improve interoperability with international taxonomies are also underway, ensuring greater usability for businesses operating across borders. These changes aim to reduce compliance burdens so keep reading to stay in the know.

Recent Updates

Simplification Initiatives

In February 2025, the EU Platform on Sustainable Finance released recommendations to simplify reporting templates, aiming to reduce the number of required fields and make them more user-friendly for companies. Additionally, a January 2025 report proposed updates to the technical screening criteria (TSC), including the addition of new activities such as digital solutions and materials production (e.g., lithium, nickel, copper) and streamlined "Do No Significant Harm" (DNSH) criteria.

Expanded Scope

As of January 2024, companies are required to report their eligibility under all six environmental objectives outlined in the EU Taxonomy. Starting in January 2025, alignment reporting will also be mandatory. These objectives include climate change mitigation and adaptation, water and marine resource protection, circular economy transition, pollution prevention, and biodiversity protection.

Interoperability Focus

Efforts are ongoing to align the EU Taxonomy with other international taxonomies. This initiative aims to reduce market fragmentation and improve usability for businesses operating globally.

Public Consultation

From January to February 2025, a public consultation was held to gather feedback on updates to the Climate Delegated Act. The consultation focused on revising technical screening criteria and incorporating additional activities into the taxonomy.

Future Timeline

2025

Q3 2025: The European Commission is expected to adopt simplified technical screening criteria based on Platform recommendations.

2026

There will be a full implementation of simplified DNSH criteria across all environmental objectives, as well as the potential introduction of a "comply or explain" approach for DNSH reporting.

2027

Expect the first review of expanded Taxonomy criteria to assess its effectiveness and usability.

Ongoing

There will be regular updates to Delegated Acts to include new activities and refine existing criteria.

Key Changes Expected

Simplified Reporting

Streamlined reporting templates are being introduced to reduce the administrative burden for non-financial companies, potentially lowering compliance costs by more than one-third.

Expanded Activity Coverage

The scope of covered economic activities continues to grow, with new additions under both the Climate and Environmental Delegated Acts. These updates reflect the changing technologies and market demands.

Enhanced Usability

Simplified "Do No Significant Harm" (DNSH) criteria are making it easier for companies to assess their alignment with sustainability standards while ensuring that robust environmental protections remain in place.

Global Alignment

Efforts to improve interoperability with taxonomies from other jurisdictions are underway, enabling smoother cross-border investments in sustainable projects and fostering global collaboration.

Key Takeaways

With the way sustainable finance is constantly changing at the moment, it has never been more crucial to ensure you’re up to date with the latest developments in SFDR, CSRD, SDR, and the EU Taxonomy. These frameworks are not static; they are continuously refined to improve transparency, reduce administrative burdens, and promote global alignment. By understanding the recent updates, future timelines, and key changes expected, businesses and investors can better understand the intricacies of sustainable investing, ensure compliance, and contribute to a more sustainable future. Embracing these changes will not only reduce risks but also unlock opportunities for innovation and growth in the growing green economy.