‘Transitioning’ label tops industry wishlist in SFDR debate

Fund industry executives are keen on proposals to update the Sustainable Finance Disclosure Regulation (SFDR), the EU’s anti-greenwashing rules, particularly the SFDR’s fund classification system, according to a survey from the consultancy PwC released Tuesday.

Under the current SFDR rules, which went into force in March 2021, investment funds are classified as article 8, meaning that they use ESG criteria as part of their investment processes; article 9, meaning that their investments have a proactive sustainability goal; or article 6, meaning that fund managers make no green or responsible investing claims at all.

The European Commission proposed a revamp of the categories in November 2025, although the so-called SFDR 2.0 guidelines remain a working document and it is unclear when the new regulations will be finalised.

Around three-quarters of survey-takers (73.5%) told PwC that they want a new classification system, with the remaining quarter of respondents (26.5%) happy to tinker with the existing regime.

Among fund executives who preferred an entirely new product categorisation regime (41%), the most desired label would be “transitioning” (80% of the 41%), which would indicate a fund is helping finance the transition from polluting or inefficient processes towards greener methods. A potential “sustainable” label followed in close second place (75%).

The European Securities and Markets Authority (Esma), a pan-EU financial regulator, issued fund naming guidelines that took effect in May 2024, aiming to crack down on misleading investment fund names. These regulations are separate from SFDR.

Just more than half of management companies in the PwC survey (53%) said they had revised fund names to comply with the Esma rules. Around a fifth (22%) changed the strategy of a fund, while another fifth (19%) made no changes.

An earlier report, from MSCI Research, found that more than a fifth of European investment funds changed their names between May 2024 and May 2025. Unrelated Esma research found that using ESG-related terms in a fund name boosted net inflows.

Four out five management companies in the PwC poll said they emphasised both environmental and social characteristics in their fund screening criteria.

The report is based on a survey carried out last year of 53 European fund management companies that collectively have €3.7 trillion in assets under management.