Italian Sustainable Investment Forum
New developments regarding the Omnibus Simplification Package. The proposal to revise the SFDR has been published.
The year 2025 is ending with several significant developments in sustainable finance that will have a substantial impact on the current European regulatory architecture.
Updates on Omnibus
The European Parliament has definitively approved the Omnibus I package, which significantly reduces the scope of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The CSRD would apply to companies with more than 1,000 employees and more than €450 million in net turnover (–90% of companies currently within scope), while the CSDDD would apply to companies with more than 5,000 employees and more than €1.5 billion in net turnover (–70% of companies currently within scope). In addition, the obligation to implement climate transition plans under the CSDDD is removed. The revised CSDDD will then have to be transposed by Member States by mid-2028 and will enter into force in mid-2029. The revision of the CSRD will apply from January 2027.
In relation to the Omnibus package, the European Ombudswoman, Anjinho, has issued a recommendation on the European Commission's compliance with the Better Regulation rules. The Ombudswoman identified serious procedural irregularities by the Commission in the preparation of certain legislative proposals deemed “urgent” in three parallel investigations concerning the Omnibus package, the reform of the Common Agricultural Policy (CAP), and legislation against migrant smuggling. The investigations were launched following several complaints submitted by NGOs and Members of the European Parliament. The issues identified in the case of the Omnibus concern the reduction of the internal consultation period to less than 24 hours over a weekend and the lack of adequate documentation of key assessments regarding the consistency of the package with climate objectives. The Ombudswoman recommends that the Commission ensure a predictable, consistent and non-arbitrary application of the rules, as well as a transparent, inclusive and evidence-based process for the preparation of urgent legislative proposals.
Proposal for the revision of the SFDR
The European Commission has published the long-awaited proposal to revise the Sustainable Finance Disclosure Regulation (SFDR), following a lengthy process initiated in 2022. Among the most significant changes is the introduction of a product categorisation system. In line with the recommendations of the European Supervisory Authorities (ESAs) and numerous stakeholders, three types of sustainability-related financial products are introduced.
The new Article 7 governs the introduction of the first category of sustainable products, namely transition products. These are products that invest in, or contribute to, the transition of companies, economic activities, or other assets. Specifically, at least 70% of investments must be allocated to achieving a clear, measurable transition objective (both social and environmental). These products may also qualify as “impact” products, which pursue a predefined, measurable positive social or environmental impact. Such products must apply the exclusions required by the Climate Transition Benchmark (CTB). They must exclude investments in new projects for hard coal and lignite, as well as oil and gas fuels, including for power generation, where no phase-out plan for these activities is in place. A product is automatically compliant with the category where it replicates or is managed with reference to a CTB or a Paris-Aligned Benchmark (PAB), or where it demonstrates that at least 15% of investments are aligned with the EU Taxonomy.
The second category of sustainable products, the so-called ESG Basics products, is governed by the revised Article 8. These are products that invest at least 70% in assets that integrate sustainability factors, in addition to considering sustainability risks. The same exclusions that apply to transition products apply, except for those relating to new investments in fossil fuel-related projects or projects without a phase-out plan. No safe harbour provisions apply to this category, so products cannot be automatically deemed compliant.
The new Article 9 introduces the category of fully sustainable products. To fall within this category, at least 70% of investments must be allocated to achieving a clear and measurable sustainability objective, and the same exclusions defined under Article 7 must be applied, with the addition of those required for PABs. Article 9 products may also qualify as “impact” products. The safe harbour provisions apply where the product replicates or is managed with reference to a PAB, or where it demonstrates that at least 15% of investments are aligned with the EU Taxonomy.
