Creating a framework that helps sustainable products flourish
Sustainable funds can no longer be seen as a niche area. It is expected that ESG/sustainable funds will represent an even larger share of the overall fund market in the future. The sustainability trend has definitely taken off and will there to stay.
ALFI is thoroughly convinced of the key role that asset managers can play in fostering sustainable finance and the great opportunities that it represents for asset managers and investors.
Ever since ALFI organised its first microfinance conference more than ten years ago, it has considered responsible investing as the “third pillar” of the Luxembourg investment fund industry, aligning its importance with that of the other two investment fund pillars – UCITS and AIFs.
ALFI is one of the founding members of LuxFLAG, a finance labelling agency. LuxFLAG aims to promote the raising of capital for sustainable investments by awarding a recognisable label (currently six different labels) to eligible investment vehicles.
Sustainable finance is one of the key priorities of the association as outlined in the ALFI Ambition 2030.
SFDR 2.0 and Taxonomy Regulation
On 20 November 2025, the European Commission published a proposal for SFDR 2.0, marking a major review of the Sustainable Finance Disclosure Regulation, which originally entered into force in March 2021. The proposal aims to simplify the framework and make sustainability objectives clearer for end investors, while also reducing greenwashing risks as part of the broader EU regulatory simplification agenda.
A key change is the replacement of the current Article 8 and Article 9 classifications with three new fund categories: Transition, ESG Basics, and Sustainable, with impact funds explicitly recognised for the first time. Under the new framework, funds would need to demonstrate that at least 70% of their investments contribute to sustainability objectives and comply with strengthened exclusion rules similar to the EU Paris-Aligned Benchmark (PAB) and the EU Climate Transition Benchmark (CTB), including new limits on fossil-fuel expansion.
Reporting requirements would also be simplified, with entity-level Principal Adverse Impact disclosures removed, product-level Taxonomy disclosures becoming optional unless central to the strategy, and greater scrutiny placed on sustainability data. Although the proposal introduces significant changes, nothing will take effect immediately, as it must first go through negotiations in the European Parliament and the Council.
Data
The definition of ESG and sustainable data, templates, collection, aggregation and dissemination of data are new challenges for the industry as well as for investee companies.
The European Commission is conscious of the need to improve access to financial and non-financial information from companies. It suggests building a European Single Access Point (ESAP). The overall objective of the ESAP is to facilitate the flow and use of information, to make it machine-readable, to reduce search and processing costs and to foster interoperability. The ESAP also has the potential to support the EU climate and environmental objectives and the sustainable finance agenda by enabling better access to ESG information.
ALFI is supportive of different industry bodies such as FinDatEx, a European initiative to create European ESG related templates and an ESG Data Definition Inventory (EDDI) aiming to capture transaction-related ESG data requested under relevant existing and upcoming EU regulatory requirements.
[1] Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector.
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