SFDR Reform: Market Feedback and Investment Implications

Research evidence excerpt

SFDR Reform: Market Feedback and Investment Implications

Foundation

July 22, 2026 04:00 AM GMT

Morgan Stanley & Co. International plc+MSustainability | Europe Arushi Agarwal, CFA

Equity Strategist

SFDR Reform: Market Feedback Arushi.Agarwal1@morganstanley.comRachel Fletcher, Ph.D. +44 20 7677-3944

Rachel.Fletcher@morganstanley.com +44 20 7677-4089

and Investment Implications Morgan Stanley & Co. LLC

Stephen C Byrd

In a recent webcast, we polled our audience on sentiment Equity Analyst

Stephen.Byrd@morganstanley.com +1 212 761-3865

around SFDR Reform. In this note, we provide the results from

Morgan Stanley Asia Limited+

our poll and an overview of investment implications for Article 7 Ehsernta Fu

and Article 8 funds following Council's position on the Reform. Equity Strategist

Ehsernta.Fu@morganstanley.com +852 3963-3711M

Key Takeaways

Most of the investors we polled are not considering reclassifying existing funds

or launching new funds under the proposed Article 7 category.

The majority have yet to decide whether their funds will opt out of the new

SFDR categorisation system.

Some investors have begun assessing the portfolio impact of the proposed rules,

but none are implementing changes yet.

The Council’s Article 7 exclusions exemption will keep major Utilities holdings

eligible, while Energy names such as TotalEnergies may still fall short.

Under Article 8, the above-average ESG approach could increase sector and

country concentration and affect eligibility for some widely held names.

Related Research -

Sustainability: Regulatory Review: June 2026 (26 Jun 2026)

Sustainability: SFDR Reform: Council's Final Negotiating Position (24 Jun

2026)

Sustainability: SFDR Reform: Tracking Tripartite Developments (10 Jun 2026)