Sustainability Community

The Platform on Sustainable Finance has proposed a new categorisation system for sustainable finance products, suggesting three key labels:

🔹 Sustainable – Taxonomy-aligned investments or those with no significant harmful activities.
🔹 Transition – Investments supporting the shift to net zero and a sustainable economy.
🔹 ESG Collection – Investments that exclude significantly harmful activities and apply sustainability features.

All other products would be unclassified, according to the Platform's recommendations.

With the EU expected to release an SFDR review in Q4 2025, the big question remains: Will this lead to a clearer, more investor-friendly system, or is SFDR evolving into a technical framework rather than a labelling tool? Will we see less labelled funds than we do now with Article 8 and 9?

Would love to hear your thoughts!

Report available here: Categorisation of products under SFDR – Report

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Francesca Wheble
Responsible Investment Lead
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While at the moment SFDR is used as a labelling tool, it is NOT that, it is a disclosure tool as it was intended to be. As a disclosure tool, it allows asset managers to communicate in a harmonized way how they are managing sustainability risks, promoting E and/or S characteristics or targeting sustainable objectives. Due to this there are many different investment approaches that managers can take to manage sustainability risks, promote E and/or S characteristics or targeting sustainable objectives - this therefore means that as a labelling tool it is not that beneficial - because of the heterogeneity of approaches used under each categorisation Article 6, 8 or 9.

Asset managers are highly creative and will look to meet client demand, so I am sure that we will see a good number of labelled funds.

However, I do not think that this will necessarily lead to a clearer, more investor friendly system. Investment activity is incredibly varied, as it should be. Fitting varying investment strategies into a limited number of categories is a tough job, and investors will still need to good beneath the label to really understand the investment process and objectives of a fund.