As part of the European Commission's recent call for evidence on the SFDR (Sustainable Finance Disclosure Regulation) review, a clear pattern has emerged across industry submissions: a strong and widespread call for the formal recognition of so-called "Article 8+"funds.

At 414, we echoed this request in our own submission. Given how frequently this idea has appeared across responses, it seems increasingly likely that the Commission will give it serious consideration in the upcoming months.

Why Article 8+?

The core issue lies in how the SFDR currently classifies financial products. The regulation defines three categories:

• Article 6: funds with no sustainability integration;
• Article 8: funds that promote environmental or social characteristics; and
• Article 9: funds with sustainable investment as their objective.

However, the vast majority of ESG-oriented funds today fall under Article 8, making it an overly broad and opaque category. It includes both:

• Funds with minimal ESG integration (e.g. exclusions only); and
• Funds with strong sustainability ambitions (e.g. impact-oriented or aligned with transition goals) which do not reach the thresholds required by Article 9.

This lack of distinction creates confusion for investors, particularly retail investors who often rely on the Article classification as a shorthand for a fund's sustainability credentials. It also undermines the very goal of the SFDR: to improve transparency and comparability.

If you’d like to better understand why Article 8 funds are so popular, check this article.

The concept of an "Article 8+" fund has emerged informally in response to this ambiguity. It is used to describe funds that go beyond minimum Article 8 requirements but do not meet the stricter conditions of Article 9.

Several submissions to the Commission argue that this middle ground deserves its own formal recognition, whether through a fourth product category or a clearer framework for voluntary disclosures. Some even suggest introducing a grading system that scores funds based on their level of ESG ambition and integration.

Such proposals, however, raise new questions. The SFDR was not originally designed to validate funds as more or less sustainable; its intent is to compel funds to explain how they approach sustainability, not how well they perform. Investors are expected to read the disclosures, not just rely on an Article 8 label. But in practice, most investors do exactly that, given the structure and limitations of the current disclosure templates, especially in private markets.

More Categories or More Simplicity?

Some stakeholders call for expanded ESG-themed disclosures to better reflect diverse strategies. Others, like the Dutch Authority for theFinancial Markets (AFM), recognise the same problem but caution against overcomplicating the regulation. Their concern is that adding more disclosure types or turning the SFDR into a de facto fund classification system could defeat the purpose of simplifying the framework and making it more applicable.

That same perspective is shared by Invest Europe, who argue that the SFDR should remain a disclosure-based framework, rather than evolve into a formal product categorisation regime. Their concern reflects the global nature of private markets. Most private fund managers raise a single fund for multiple jurisdictions, and must navigate differing ESG expectations across regions. Mandating a product label within the EU could create misalignment with other regulatory environments or investor preferences, raising legal and operational risks.

Invest Europe highlights that their members have already invested substantial time and resources into adapting to the current SFDR system. A shift towards categorisation, they argue, would impose further burdens without necessarily improving outcomes. If labels are introduced, they should be optional, and primarily targeted at retail investor contexts, not made compulsory for professional funds.

This divergence highlights the core tension at the heart of the SFDR review: how to make the regulation more informative without making it more burdensome.

However, in our view, shared by many other submissions, the idea of maintaining SFDR strictly as a disclosure regime, while reasonable in theory, no longer reflects market reality. Today, investors overwhelmingly refer to “Article 6”, “8”, or “9” funds as shorthand for distinct product types, not disclosure obligations. This shorthand has taken hold not because it was mandated, but because it’s the most accessible way for investors to navigate a complex landscape.

If the problem is indeed that the market faces too many fragmented frameworks, some of which already assign formal sustainability labels, then perhaps the solution lies in making the SFDR the one clear, navigable, and reliable source of truth. By evolving it into a more structured classification system, the SFDR could fill the vacuum now occupied by overlapping private frameworks, which often lack transparency or alignment with EU priorities.

We believe the European market’s scale, combined with the Brussels effect, would support such a shift. Over time, a more effective SFDR could become the de facto global reference, not just a European compliance obligation. And we’re not alone in this vision: it’s echoed by disclosing institutions, as well as supervisory authorities such as Spain’s CNMV.

Interestingly, the CNMV offers a concrete vision for how a product categorisation scheme could work. Drawing from the Platform on Sustainable Finance’s recommendations, it proposes three clear categories tailored to investor needs:

• Sustainable: For products investing in Taxonomy-aligned activities or other sustainable investments that do no significant harm.‍
• Transition: For products supporting the transition to a net-zero economy, avoiding carbon lock-in, and aligning with the EU’s guidance on financing the transition.‍
• ESG Collection: For products that use meaningful ESG strategies, such as excluding harmful activities or favouring better-performing assets.
  

All other products, under this model, would be labelled as Unclassified, for more transparency when a product does not fall into any of the categories above.

A potential formalisation of the "Article 8+" label would acknowledge the spectrum of sustainability ambition that currently exists within Article 8 and provide clearer signals to investors. But whether the Commission opts for a new category, themed disclosures, or a scoring system, the challenge will be balancing granularity with usability. As the SFDR evolves, it will be crucial to ensure that transparency improves in a way that empowers without overwhelming market participants.

That said, we understand and respect both sides of the argument. We’ve aimed here to present the debate fairly, because whether the best solution aligns with our proposal or another, what matters most is ending up with a regime that is practical, consistent, and usable.

Check out all the submissions here.

We welcome your views. If you’d like to discuss, collaborate, or simply ask questions about our position, don’t hesitate to reach out.

At 414, we continue to monitor these developments closely and help clients navigate their own classification strategies in line with both market expectations and regulatory clarity.