Major financial institutions are lobbying for revised European sustainability fund rules to maintain the status quo and to enable “ESG” or “transition” funds to support even the most polluting companies. Indeed, the analysis of the responses provided by financial institutions and their interest groups to the consultation conducted by the EU Commission in May 2025 suggests they are pressing for the reviewed Sustainable Finance Disclosure Regulation (SFDR) to include broad fund categories with no or very limited exclusions. Sometimes misrepresenting the recommendations of the EU Platform on sustainable finance, they are pushing to limit fossil fuel exclusions to just one SFDR category – effectively giving fossil fuel developers a safe haven in all the others.
In May 2025, the EU Commission opened a consultation on the “revision of EU rules on sustainable finance disclosure”. This consultation was the last opportunity for stakeholders to provide input before the Commission finalizes its proposal for the SFDR review. Analyzing the responses provided to the consultation by financial institutions and the organizations representing them therefore gives an overview of their priorities for this file (1).
Flexibility and inclusiveness: vague principles for preserving existing greenwashing practices
Financial institutions and their representatives use generic terms in their consultation responses, making it difficult for non-specialists to understand what the implications of their demands would be. They often call for “minimum requirements” to be defined for each SFDR category (2) and some even explicitly reject a “catch-all” category (3). Yet, at the same time, their responses point toward at least one – and usually two – broad SFDR category whose characteristics would be loosely defined and would enable the financing of highly polluting companies and activities.
These categories are named “transition”, “ESG” or “responsible”, depending on the response. Regardless of the exact label used, financial institutions unanimously push for a “flexible” categorization system that avoids “prescriptive” metrics, considers all investment strategies and is tailored to integrate current market practices (4).
Furthermore, they underline the need for all products currently commercialized under articles 8 and 9 to fit into future SFDR categories. But this would mean preexisting greenwashing practices that were among the leading reasons to review SFDR would be maintained, and retail investors would continue to be misled. Axa Group goes as far as to reject the review of the SFDR and promote instead “quick fixes and methodologies clarification” (5).
Keeping fossil fuels in “ESG” and “transition” funds
In recent years, it has become clear that including fossil fuel companies – and especially those developing new projects – is a strong indicator of fund greenwashing. Research repeatedly revealed that Article 8 and 9 funds still massively support these companies, unknowingly to retail investors.
Yet, most financial institutions – including BPCE, BNP AM, Blackrock, Axa, Allianz and Schroders – do not mention the exclusion of fossil fuels in their contributions (6). Except for La Banque Postale Asset Management (7) and Triodos Bank (8), all other institutions mentioning fossil fuels only recommend exclusions for a “sustainable” category (9). Concretely, these proposals would mean that other new SFDR categories – for example “transition”, “ESG” or “impact” categories – would not include any fossil fuel exclusion. This is sometimes justified by the need to “align” with recently published ESMA fund naming guidelines, rules that were influenced by the lobbying of the same institutions and have unfortunately already shown their limitations (10).
If most financial institutions do not spell out their opposition to fossil fuel exclusion in SFDR categories, the European Fund and Asset Management Association (EFAMA) goes to great lengths to justify its refusal of any type of exclusion for the “transition category”. The arguments used by the EFAMA would ensure that fossil fuel companies are not kicked out of funds making sustainability claims. They mean that coal, oil and gas companies that are still massively developing fossil fuel production, only very marginally investing in sustainable energy, and have recently scaled back their climate targets and commitments (11) could still be found in “transition” funds.
Interestingly, contributions often refer to the position of the Platform on Sustainable Finance (PSF) (12). They do so either without mentioning related fossil fuel exclusions – notably the EBF and Insurance Europe – or by misrepresenting the PSF recommendations on the topic. Indeed, they sometimes note the PSF recommends the use of exclusions in the Paris Aligned Benchmark (PAB) for a “sustainable” category and in the Climate Transition Benchmark (CTB) for the two other proposed categories (“ESG-Collection” and “transition”). But they omit the fact the PSF also recommends reviewing both PAB and CTB exclusions to ensure that fossil fuel developers are excluded from all SFDR categories. This leads to institutions like the FBF supporting the PSF recommendations “on paper”, yet being opposed to the fossil fuel exclusions it implies for “transition” or “ESG” categories.
If the European Commission blindly listens to the demands of financial institutions, the reviewed SFDR will largely reproduce the mistakes of the previous regulations and have little impact on retail investor confidence and the development of sustainable finance. New rules simply cannot be modelled to accommodate market practices that have been demonstrated to enable greenwashing. To prevent this, all SFDR fund categories must include robust minimum safeguards. And, providing their massive climate, environmental and human impacts, excluding fossil fuel developers is unavoidable for all of them.
