EU lawmakers back fossil fuels in SFDR Transition Funds

illuminem summarises for you the essential news of the day, reviewed by our editorial team. Read the full piece on ESG News or enjoy below:

🗞️ Driving the news: The European Parliament's ECON committee adopted its SFDR negotiating position on 10 September, backing a narrower scope and criteria that would let fossil fuel companies expanding production qualify for the proposed transition category
• They would need to direct at least 20% of annual investment toward EU Taxonomy-aligned activities, and over a rolling three-year period invest more in green activities than in new fossil projects

🔭 The context: ECON also supports exempting some products sold to professional investors from categorisation disclosure, mirroring a Council proposal from June
• That category includes smaller institutions such as local pension schemes, which may lack internal sustainability expertise and rely on common frameworks to compare products
• As a counterweight, firms would have to disclose annually what proportion of their funds falls within each SFDR category

🌍 Why it matters for the planet: The transition category is meant to identify companies shifting capital away from high-carbon activity, and a 20% threshold admits firms still expanding oil, gas and coal output
• WWF EU's Thibault Girardot argues climate science is largely absent from the position and that the rules loosen what counts as a credible transition, leaving investors less able to distinguish genuine capital reallocation from continued expansion

⏭️ What's next: ECON has a mandate to enter trilogue negotiations with the Council and Commission, expected to begin in October
• The outcome will set how much of Europe's investment market stays within SFDR and where the line on credible transition activity falls

💬 One quote: "Companies opening new oil and gas fields or building new coal plants have no place in a category designed to help Europe shift to a sustainable economy" — Thibault Girardot, Sustainable Finance Policy Officer, WWF EU

📈 One stat: A 20% minimum share of annual investment in Taxonomy-aligned activities for a fossil fuel company to qualify as transitioning

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