SFDR 2.0: What it means for financial institutions in Liechtenstein and Switzerland
Introduced in November 2025 as a proposed set of amendments to the Sustainable Finance Disclosure Regulation, SFDR 2.0 aims to simplify and clarify sustainability disclosures by financial product manufacturers and managers. It removes entity-level principal adverse impact disclosures (PAIs), and revises product categories. Products must have a portfolio alignment of at least 70% with sustainability criteria.
Liechtenstein and Swiss financial institutions face new compliance requirements and have opportunities to innovate and enhance transparency, as well as maintaining access to EU markets in the evolving sustainable finance landscape.
Why SFDR 2.0 represents a transformational development
The original SFDR aimed to protect investors and prevent greenwashing by requiring firms to disclose how sustainability risks are integrated into their investment processes. However, complexity and inconsistent definitions caused confusion. Introduced in November 2025, the proposals in SFDR 2.0 seek to simplify compliance and improve clarity.
What’s new in SFDR 2.0?
- Simplified scope: SFDR 2.0 applies to financial product manufacturers and managers excluding financial advisers. Discretionary portfolio mandates (DPMs) are excluded from the scope and definition of “product”.
- Elimination of entity-level principal adverse impacts (PAIs): The requirement for the resource-intensive entity level PAI statement has been removed.
- Revised product categories: The previous Articles 8 and 9 have been replaced by three new categories:
- Sustainable (Art. 9): Products that actively contribute to sustainability goals.
- Transition (Art. 7): Investments in companies that are on credible paths to becoming sustainable.
- ESG Basics (Art. 8): Products that integrate ESG factors but do not meet the definitions for the other two categories.
- Introduction of Article 6a: For products that have some sustainability features but not enough to fit any of the main categories.
- Stricter eligibility criteria: Products must have at least 70% of their portfolio aligned with sustainability criteria and meet mandatory exclusions.
- Improved Disclosure Templates: Shorter, clearer templates.
How to prepare for SFDR 2.0
SFDR 2.0 is expected to become applicable by the end of 2028, and firms should take the following preparatory steps:
- Confirm whether they fall within the new scope (advisers and DPMs are now excluded).
- Review and categorise products according to the new classification system.
- Assess whether products meet the 70% portfolio alignment and exclusion requirements.
- Enhance data governance frameworks and sustainability assessment methodologies.
- Update product disclosures, marketing materials, and investor communications to comply with the revised requirements.
What this means for Liechtenstein and Swiss financial institutions
Although SFDR is an EU regulation, its application extends beyond EU borders, impacting both Liechtenstein and Switzerland, significant financial centres closely connected to the EU market.
As a member of the European Economic Area (EEA), SFDR 2.0 will require Liechtenstein’s financial institutions to:
- Reassess and potentially redesign product offerings to conform to the new categories.
- Enhance transparency and data quality to satisfy streamlined disclosure requirements.
- Manage operational adjustments, including new portfolio monitoring activities and the discontinuation of entity-level PAIs.
- Capitalise on opportunities to develop transition-focused products that appeal to sustainability-conscious investors.
- Coordinate cross-border compliance efforts to maintain uninterrupted access to EU markets.
Switzerland, although it is neither an EU nor an EEA member, is a leading financial centre deeply integrated with Europe. With many funds of Swiss financial institutions domiciled within the EU, SFDR 2.0 entails:
- Voluntary alignment of Swiss funds with the new SFDR framework to retain access to EU investors.
- Strengthening ESG data management and reporting to meet more rigorous disclosure standards.
- Reclassifying products marketed within the EU, which may necessitate modifications or redesigns.
- Gaining competitive advantage by adopting SFDR 2.0 early and demonstrating robust sustainability credentials.
While SFDR 2.0 is a regulatory requirement, it also gives financial institutions an opportunity to enhance their sustainable finance strategies, increase investor confidence and protection, create innovative products supporting the green transition, and mitigate the risks of greenwashing. Early action is crucial for Liechtenstein and Swiss firms to lead in this evolving market.
How Deloitte can support you
We can support you in your response to SFDR 2.0, from strategic planning to implementation.
Our services include:
- Impact assessments and portfolio mapping: Evaluating products against new categories and identify gaps.
- Disclosure and reporting support: Developing ESRS-aligned templates and improving data governance.
- Methodologies and KPIs: Strengthening sustainability frameworks and transition metrics.
- ESG and climate risk management: Integrating risks into decision-making and supporting stress testing.
- Marketing alignment: Ensuring compliance with new ESG claim rules.
- Governance readiness: Advising on process redesign and training.
Authors
- Greta Cenotti, Manager, Audit & Assurance, Sustainable Finance SME
- Magnus Kerner, Manager, Audit & Assurance, Financial Services – Liechtenstein & Switzerland
