SFDR 2.0 in Autumn 2026: Parliament Finds Its Voice – and the Trilogue Door Creaks Open

Meike Borchers

Jul 17

9 min read

Updated: Sep 29

An September update for real estate and infrastructure investors

When we wrote about SFDR 2.0 in January (SFDR 2.0: From Labels to Leadership – Why It Matters Now), the European Commission's November 2025 proposal was fresh off the press and the industry was still deciding whether to applaud, groan, or do both simultaneously.

In July we reported that the fog around SFDR 2.0 was lifting "slowly, and in instalments" – and that even the European Parliament's committee vote had acquired a phase-in period. That instalment has now been paid. On 10 September 2026, the ECON committee adopted Parliament's negotiating position by 37 votes to 9, with 4 abstentions, after the July vote was postponed over a lack of compromise.

So, for the first time, both co-legislators have a position on the table:

The Council agreed its negotiating mandate on 24 June 2026.
ECON adopted Parliament's position on 10 September 2026; the mandate to open negotiations is due to be announced at the October I plenary session (5–8 October 2026). Unless it is challenged there and put to a full plenary vote, trilogues with the Council and Commission can then begin.

The headline for real asset managers: the two texts have converged more than many expected. That includes the professional-investor AIF opt-out, which in July looked like a Council-only curiosity. The remaining battles are narrower, more technical, and (for private markets) no less important:

how long funds get to reach the 70% threshold,
how fossil-fuel companies can qualify as "transition", and
how many PAIs each category must carry.

As before, one caveat, because precision matters: none of this is law yet. What follows distinguishes between the Commission's proposal, the Council's mandate and Parliament's committee position.

Where the process stands

The European Parliament. After roughly 600 amendments and a failed attempt in July, political groups struck a compromise in early September. It was not a love match: the EPP's Markus Ferber publicly said a text written "on a blank slate… would look different", but the group backed it. The compromise broadly keeps the Commission's three-category architecture (Sustainable – Transition – ESG Basics, each with a 70% threshold) and makes targeted changes:

Professional-only AIF opt-out – now in Parliament's text too. AIFs marketed exclusively to per se MiFID II professional clients could opt out of most SFDR 2.0 obligations. As in the Council text, this does not cover UCITS, and it is lost if the fund is also offered to elective professionals or retail investors. One notable difference: Parliament keeps its restrictions on sustainability-related fund names and marketing claims, leaving it unclear how far those would still bite on opted-out funds.
Closed-ended grandfathering, with strings attached. Closed-ended funds no longer being distributed when SFDR 2.0 takes effect remain exempt – but Parliament expressly requires managers to keep honouring the contractual commitments and sustainability disclosures made under SFDR 1.0.
Ramp-up without a hard cap. Parliament allows a ramp-up towards the 70% threshold with investor disclosure, but – unlike the Council – sets no three-year maximum.
Fossil fuels: a pathway, with a Parliament twist. Both institutions now accept that fossil-fuel companies can sit in the Transition category if at least 20% of CapEx is Taxonomy-aligned and they have a measurable, time-bound emissions-reduction strategy. Parliament adds a further test: over a rolling three-year period, Taxonomy-aligned CapEx must exceed CapEx on new fossil-fuel exploration and extraction. Expect this to be a live trilogue issue – and a relevant one for energy infrastructure portfolios.
Mandatory PAIs in all three categories. Transition products would report fossil-fuel exposure, GHG emissions and at least one further Commission-specified indicator; Sustainable products four named indicators (including biodiversity-sensitive areas); ESG Basics at least fossil-fuel exposure. The Council, by contrast, requires at least three PAIs for Sustainable and Transition only.
Taxonomy safe harbours. 15% Taxonomy alignment for Transition and 20% for Sustainable as a route to meeting the 70% contribution condition (other category requirements still apply).
Engagement – comply or explain. Transition and ESG Basics products would disclose their engagement strategy, portfolio coverage and how it serves the product's objectives, or explain why they don't engage.
Common exclusions. Reporting on the compromise points to exclusions across categories for tobacco, controversial weapons and severe, unremediated breaches of the UN Guiding Principles/OECD Guidelines – with a more nuanced "severe" threshold than the Commission proposed.
Public-sector debt. Like the Council, a cap of 15% of the portfolio for general-purpose EU public-sector debt counting towards Transition – Parliament extends this to public-sector loan facilities.
Tight fences around non-categorised products (Article 6a). Sustainability information capped at 10% of the investment-strategy disclosure and kept secondary; no reference to voluntary labels that go beyond the EU categories; and a prominent statement in periodic reports that the product is not categorised.
More transparency at entity level. Annual website disclosure of the share of AUM and of products in each category.
A faster review. A Commission review after three years (Council: five), including whether names like "ESG Basics" are actually understood by investors.

The Council. Its 24 June mandate stands as described in July:

professional-only AIF opt-out,
24-month application period,
a phase-in for the 70% threshold capped at three years,
at least three mandatory PAIs for Sustainable and Transition products,
the 20% CapEx pathway for fossil-fuel companies,
a 15-percentage-point public-sector debt allowance,
recognition of comparable non-EU sustainability standards for the Sustainable category, and
a prescribed disclaimer where non-categorised products include limited sustainability information.

What comes next. Once the October plenary confirms Parliament's mandate, trilogues can start – most likely in October. Commentators expect a final Level 1 text to be published in Q2 2027 at the earliest. Because Council and Parliament now both want 24 months between entry into force and application (the Commission proposed 18), the realistic go-live is early to mid-2029. In July we called 2029 "increasingly plausible"; it is now the working assumption.

The updated milestone picture

Milestone	Status / Expected timing
Commission proposal, COM(2025) 841	Published 20 November 2025	✔
Commission feedback period	Closed 6 April 2026	✔
Rapporteur's draft report (Gerbrandy)	Published 28 April 2026	✔
Council negotiating mandate	Adopted 24 June 2026	✔
ECON committee vote	Postponed from 15 July; adopted 10 September 2026	✔
Plenary announcement of Parliament's mandate	October I session, 5–8 October 2026 (full plenary vote only if challenged)
Trilogue negotiations	Expected to start October 2026
Political agreement / publication (Level 1)	Q2 2027 at the earliest
Level 2 delegated acts and implementing detail	Timing still to be determined
Application	24 months after entry into force (Council and Parliament aligned) → early to mid-2029

(All forward dates remain indicative. We have learned not to trust a Brussels calendar more than a Deutsche Bahn timetable – and we say that with affection for both!)

Why real asset managers should pay particular attention

1. The AIF opt-out has gone from long shot to likely – but read the small print. With both co-legislators now supporting an opt-out for per se professional-only AIFs, commentators consider it significantly more likely that some form of it survives trilogue. That fits a large share of institutional real estate and infrastructure vehicles. Three caveats remain:

Investor mix matters. One elective professional (a family office, a smaller pension scheme opted up) in the register and the opt-out falls away. Check your investor base and distribution strategy now, not at the next close.
Opting out is not saying nothing. Opted-out funds would face tight limits on how they talk about sustainability – and, in Parliament's text, possibly on names and marketing claims too.
Your LPs still won't go away. Pension schemes, insurers and funds of funds will keep asking for SFDR-style data through due diligence, side letters and reporting. Voluntary opt-in to a recognisable category may well be the commercially smarter choice.

2. The phase-in period is now the private-markets question. For drawdown structures, the difference between the Council's three-year cap and Parliament's open-ended ramp-up (with disclosure) is material. A value-add or development fund acquiring over a four- to five-year investment period may simply not hit 70% within three years. Which version survives trilogue is genuinely open – so model both.

3. Closed-ended grandfathering: relief, not amnesty. Both texts exempt closed-ended funds no longer being distributed when the rules apply. But Parliament explicitly keeps SFDR 1.0 commitments binding. For Article 8/9 real estate funds past their fundraising period, the job is to keep delivering what the prospectus promised – not to relax.

4. The Transition category remains the brown-to-green opportunity. INREV has consistently argued that a transition category will attract capital into real estate, since long-lived assets generally need retrofitting to become sustainable, and called for real-estate-specific KPIs, flexibility and appropriate ramp-up arrangements. Parliament's more flexible ramp-up helps; its mandatory PAIs (including GHG emissions) and engagement disclosure raise the evidence bar. For real estate, "engagement" translates into tenant engagement, green leases and data-sharing – worth documenting systematically now.

5. Fund-of-funds and multi-manager structures: watch Article 9a. Parliament favours a "look-through" approach for products investing in other products, where the Council preferred a pragmatic "lowest common denominator" method. For real estate funds of funds and multi-manager mandates, the Parliament approach could mean considerably more data work.

6. The real-asset detail still lands at Level 2. Criteria and thresholds still need adapting to asset classes such as real estate and private assets – which, as Eurosif and INREV have flagged, will largely happen in the Commission's technical rules, on a timetable not yet set. Keep engaging.

What we know – and what we honestly don't

Emerging convergence (not yet settled, but increasingly likely):

Three categories – Sustainable, Transition, ESG Basics – with a 70% threshold
An opt-out for AIFs sold exclusively to per se professional investors
Grandfathering for closed-ended funds no longer being distributed
Application 24 months after entry into force
A conditional pathway for fossil-fuel companies into the Transition category (20% Taxonomy-aligned CapEx plus a credible decarbonisation plan)
A 15% cap for public-sector debt counting towards Transition
Mandatory product-level PAI disclosure in some form
Tighter controls on sustainability names and claims for non-categorised products

Genuinely open:

Phase-in to the 70% threshold: three-year cap (Council) vs. no fixed maximum (Parliament)
Parliament's additional fossil-fuel CapEx test (Taxonomy CapEx > new fossil CapEx)
The PAI regime: which categories, which and how many indicators
Whether naming and marketing restrictions apply to opted-out AIFs
Taxonomy and benchmark safe harbours, and the detailed tests for ESG Basics
Combination products: look-through vs. lowest common denominator
Disclaimer wording for non-categorised products; review after three or five years
Everything at Level 2 – including whether real estate finally gets sector-appropriate KPIs and DNSH criteria

Our recommendations – unchanged in principle, sharper in practice

Check your investor register, not just your fund documents. If the AIF opt-out is on your radar, confirm that every investor is (and will remain) a per se professional. Then decide deliberately whether opting out or opting in to a category better serves your fundraising.
Model the 70% ramp-up under both scenarios – three years and open-ended – against your real acquisition pipeline, and draft what the pre-contractual disclosure of that ramp-up would say.
Keep your SFDR 1.0 promises. For closed-ended Article 8/9 vehicles heading for grandfathering, make sure the commitments already made are being met and evidenced.
Get PAI and engagement data in order – starting with GHG. Both co-legislators want mandatory product-level PAIs; they differ on scope, not direction. For real assets, asset-level energy and emissions data (including tenant consumption) is the pinch point, and tenant engagement is your engagement story.
Run the naming and claims audit across fund names, factsheets and pitch decks – particularly for any vehicle that might end up non-categorised or opted out.
Fund-of-funds managers: test your look-through data. If Parliament's approach prevails, you will need category-relevant data from your underlying funds.

The honest bottom line

SFDR 2.0 will not apply before 2029 – but the design decisions are being made in the trilogue room this autumn and winter, and many open-ended, evergreen and still-fundraising vehicles launched in 2026–2027 will live under the new regime. Waiting for legal certainty still means designing today's products for yesterday's rules.

At Karteria Partners we continue to run our "MOT" (TÜV, for those so inclined) for investment vehicles: a senior, practical review of where your products would land under SFDR 2.0, what would need to change, and in which order – investable, evidence-based, and refreshingly free of 80-page memos. If you'd like to talk through your best route into the new regime, we're happy to discuss.

Transparent claims, backed by sources – as always. This update reflects the position as at 29 September 2026.