EU ESG Regulation 2026 Update: Key Developments for the Financial Sector
The EU ESG regulatory landscape continues to evolve: from SFDR 2.0 and the simplification of CSRD and CSDDD to new requirements for ESG ratings and the EET. This article provides a concise overview of the key developments in 2026.
SFDR 2.0 – A New Framework for Sustainable Investment Products
On 20 November 2025, the European Commission published a legislative proposal to revise the Sustainable Finance Disclosure Regulation (SFDR – Regulation (EU) 2019/2088). If adopted, the proposed reform would significantly change how sustainable financial products are classified and disclosed across the EU.
The proposal would replace the current Article 8 and Article 9 classification system with three new, more clearly defined product categories:
- "Sustainable": products contributing to sustainability goals for related investments
- "Transition":products channeling investments towards companies or projects that are not yet sustainable but are on a credible transition path
- "ESG Basics":products integrating ESG investment approaches but not meeting the “Sustainable” and “Transition” categories.
The proposal aims to reduce complexity, improve comparability for investors, and address greenwashing risks. It also introduces quantitative thresholds and mandatory restrictions for each category, while simplifying and reducing overall disclosure requirements.
If adopted, the revised SFDR would have implications for Asset Managers and Fund Providers. Existing Article 8 and 9 products may need to be reviewed against the new SFDR categories, potentially affecting related processes, investment strategies, reporting templates and KPIs. Specifically, pre-contractual and periodic ESG product disclosures would need to be adapted. Also, a new EET (European Exchange Template) version is expected to reflect the final regulatory requirements. Under the proposal, entity-level reporting on PAI (Principal Adverse Impact) Indicators would be removed, while PAI disclosures would remain for products in the Sustainable and Transition categories.
EUR-Lex - 52025PC0841 - EN - EUR-Lex
Commission simplifies transparency rules for sustainable financial products
CSRD/CSDDD – Omnibus Simplification
Since March 2026, the EU’s Omnibus I package has introduced changes to sustainability reporting and corporate due diligence. The changes aim to reduce administrative burdens and support EU competitiveness by narrowing the scope of the Corporate Sustainability Reporting Directive (CSRD) and simplifying requirements under the Corporate Sustainability Due Diligence Directive (CSDDD), including by raising CSRD reporting thresholds to companies with more than 1,000 employees and more than €450 million net annual turnover.
Council of the EU – Press release
Omnibus Package – European Commission
ESG Rating Regulation – New Transparency Requirements
Since 2 July 2026, the EU ESG Rating Regulation (EU 2024/3005) is applicable, requiring all ESG rating providers operating in the EU to apply for authorization with ESMA and comply with strict transparency and independence requirements.
Regulation - EU - 2024/3005 - EN - EUR-Lex
EET Update – Editorial Revision Version 1.1.3
FinDatEx published version 1.1.3 in December 2025, followed by an editorial update in April 2026. The changes include fields related to ESMA guidelines (e.g. ESG naming convention), updates to the German MiFID ESG target market concept and further editorial adjustments (e.g. related to NACE 2.1.).
FinDaTex: European ESG Template (EET) Version 1.1.3 [editorial update]
How IDS can help you
At IDS, we are committed to supporting our clients in navigating these complex regulatory landscapes. Our comprehensive ESG solutions help clients navigate sustainability reporting requirements and support transparency and compliance. Contact our experts to learn more about how we can assist you in adapting to these changes and optimizing your sustainability reporting processes.
