SFDR : ECON Committee sends mixed signals but recognizes oil and gas problem

The ECON Committee position on the review of the Sustainable Finance Disclosure Regulation (SFDR) removes the exclusion of fossil fuel developers from the “transition” category, replacing it with a criterion based on taxonomy aligned capex, fossil fuel development capex, and decarbonization targets. Unlike the EU Council, the Committee acknowledges that it is impossible to talk about the transition without considering companies’ fossil fuel investment plans. Reclaim Finance welcomes this move and underlines that it significantly reduces the risk of transition washing. Yet, the NGO also stresses the relevance of the initial Commission proposal to exclude fossil fuel developers which provided a simple science-based criterion for exclusion. It calls on EU policymakers to apply it across all SFDR categories.

The ECON Committee has today put forward a proposal which no longer includes the exclusion of fossil fuel developers from the “transition” fund label (1) and has replaced it with other measures designed to limit fossil fuel companies access to transition funds.

The Committee is proposing a 20% capex threshold for taxonomy-aligned activities and a requirement that companies have scope 1 and 2 decarbonization strategies compatible with the Paris Agreement.

While the Committee heavily builds on the EU Council position, it moves away from it (2) by adding a requirement to allocate, over a rolling three-year period, a higher average proportion of total capital expenditure (capex) to taxonomy-aligned activities than to the development of new fossil fuel production projects.

Unlike the Council, the ECON Committee acknowledges that, to identify whether fossil fuel companies are transitioning, you must look at their fossil fuel investment. Every new fossil fuel project puts us on a path of ever-growing emissions that pushes global warming targets out of reach. Investing in sustainable energy does not compensate for investments in fossil fuels. EU policymakers should therefore go further, keep the exclusion of fossil fuel developers as initially proposed by the Commission and extend it to all SFDR categories.

Paul Schreiber, senior policy analyst at Reclaim Finance

Reclaim Finance welcomes the ECON Committee’s recognition of the need to shift investment from fossil fuel to sustainable energy. It acknowledges that the proposed criteria significantly reduce the risk of fossil fuel-related transition washing compared to the Council position (3).

Nonetheless, the NGO notes that the ECON Committee criteria suggests new fossil fuel investment can be acceptable if paired with sustainable investment, echoing arguments from fossil fuel lobbies (4), and failing to tackle the need to immediately end fossil fuel development (5).

Civil society has continuously pointed out that the exclusion of fossil fuel developers is an easily implementable science-based criteria essential to the SFDR review (6). Reclaim Finance reiterates that point and calls on policymakers to apply it to all SFDR categories (7).

Contacts:

Paul Shreiber, Senior policy analyst, paul@reclaimfinance.org
Helen Burley, International press relations, helen@reclaimfinance.org

Notes:

Fossil fuel developers are excluded from both the “sustainable” and “transition” categories in the EU Commission text. For more information, read Reclaim Finance’s reaction to the Commission text.
Read Reclaim Finance’s article on the EU Council position.
At the global level, oil and gas majors have been cutting green spending and increasing fossil fuel investment, according to Bloomberg. Their oil and gas spending is reaching their historically high 2015 level. Among EU oil and gas companies specifically, only TotalEnergies, Repsol and Galp could meet a 20% taxonomy-aligned capex threshold today. Others – like OMV, Eni or Orlen – have aligned capex above 10% and could potentially reach that threshold in the near future. Yet, all these companies invest more in oil and gas than in taxonomy-activities and would therefore be excluded following the ECON Committee proposal.
The French oil and gas company TotalEnergies, which has been convicted for misleading the public about its transition activities and failing to consider their climate impact, has lobbied extensively in favor of removing the fossil fuel developer exclusion. Despite all evidence pointing to the contrary, the company has long branded itself as a leader in the oil and gas transition and tried to secure related investment.
In the Technical Summary of the AR6 WG3 report, the IPCC notes that: “Estimates of future CO2 emissions from existing fossil fuel infrastructures already exceed remaining cumulative net CO2 emissions in pathways limiting warming to 1.5°C with no or limited overshoot (high confidence). Assuming variations in historic patterns of use and decommissioning, estimated future CO2 emissions from existing fossil fuel infrastructure alone are 660 (460-890) GtCO2 and from existing and currently planned infrastructure 850 (600-1100) GtCO2. This compares to overall cumulative net CO2 emissions until reaching net zero CO2 of 510 (330-710) GtCO2 in pathways that limit warming to 1.5°C with no or limited overshoot, and 890 (640-1160) GtCO2 in pathways that likely limit warming to 2°C (high confidence)“. Since this report was published, fossil fuel infrastructures have continued to develop and new projects are planned, leading to emissions that largely exceed the remaining carbon budget for 2°C. Other studies have showed that a large share of exploited fossil fuel reserves must not be extracted to keep the goals of the Paris Agreement alive (Dan Welsby and al, “Unextractable fossil fuels in a 1.5°C world”, Nature, 2021 / Kelly Trout and al, “Existing fossil fuel extraction would warm the world beyond 1.5 °C”, Environmental Research Letters, 2022). In fact, Reclaim Finance and Global Energy Monitor data gathered on the CarbonBombs.org website indicate that cumulated remaining emissions of 601 major extraction projects and 2,300 new extraction projects would amount to over 1,400 gigatonnes of CO₂, largely more than the remaining 2°C carbon budget.
133 signatories, “Open letter: The EU’s new sustainable investment plan needs to be completely fossil expansion-free“, Reclaim Finance, February 2026.
Providing the agreement reached by political groups on the ECON position, no plenary discussion will likely be held, and the next phase of discussion will happen in trilogue.