On 24 June 2026, the Council of the European Union adopted its position on the Sustainable Finance Disclosure Regulation (SFDR). By proposing to allow “transition” funds to invest in major oil and gas companies, it is weakening the reliability and credibility of the SFDR and severely increasing the risks of greenwashing. European lawmakers can still reject this proposal shaped by oil and gas industry lobbying and promote the emergence of a more credible form of sustainable finance aligned with the European Union’s political priorities.
In June, the European Union was experiencing extreme heat, with record temperatures putting both ecosystems and the European economy under strain. At the very same time, Member States allowed themselves to be persuaded by fossil fuel industry lobbying regarding the SFDR, the regulation governing the environmental and social claims made by funds marketed within the EU.
A few months earlier, the European Commission had proposed excluding companies developing coal, oil, and gas projects from funds labelled “sustainable” and “transition.” However, the Council has instead proposed allowing such companies to continue benefiting from “transition” funds.
Greenwashing Driven by Oil and Gas Industry Demands
The Member States’ position would replace the exclusion of fossil fuel developers with a criterion based on a threshold requiring 20% of capital expenditures (capex) to be aligned with the EU Taxonomy, along with the adoption of decarbonisation targets for direct emissions (Scope 1 and Scope 2).
This proposal:
- Ignores Scope 3 emissions, namely indirect emissions, which account for between 85% and 90% of emissions generated by companies in the sector. It also fails to ensure a minimum reduction of Scope 1 and 2 emissions consistent with climate objectives.
- Contains no criteria related to fossil fuel production. It effectively assumes that a limited expansion of sustainable activities can offset the continued development of fossil fuel activities, even though increasing fossil fuel production directly jeopardises efforts to mitigate climate change and locks in vast amounts of future emissions.
This position is the result of direct lobbying by the oil and gas industry. TotalEnergies played a central role in this policy shift, with the support of the French government. Yet the company has been convicted in France for misleading the public about its “transition” efforts and has acknowledged that it does not have a transition plan that complies with the requirements of the EU Corporate Sustainability Reporting Directive (CSRD).
This decision once again illustrates the influence of major fossil fuel companies at the European level. In practical terms, the Council is proposing to legitimize the industry’s demand to continue expanding fossil fuel activities while simultaneously claiming to be committed to the energy transition.
Members of the European Parliament Can Still Correct Course
Civil society organizations, NGOs, and scientists have repeatedly warned about the risks of such a setback. The Council’s position runs counter both to scientific guidance, which calls for a rapid and orderly phase-out of fossil fuels, and to the EU’s objective of reducing dependence on fossil energy sources.
Far from becoming more sustainable, the sector has continued to move backward, for example by abandoning decarbonisation targets, while betting on continued oil and gas consumption. According to an analysis by BloombergNEF, investments by major oil and gas companies in fossil fuel activities have returned to historically high levels, comparable to those seen in 2015.
The ball is now in the European Parliament’s court. In September 2026, Members of the European Parliament will have to choose between two options: endorsing an approach that legitimizes greenwashing and prolongs dependence on fossil fuels, or strengthening the credibility of European sustainable finance and protecting citizens and savers by excluding companies that are developing new oil and gas projects from “transition” funds.
