The European Commission’s proposal to scrap Article 8 and 9 labels from the EU’s Sustainable Finance Disclosure Regulation (SFDR) was met with a collective sigh of relief among real estate investment professionals at the EPRA Sustainability Summit 2025 in London this week.
While the replacement of the labels with new product categories forms part of a major simplification of SFDR, investors and real estate companies face the challenge of navigating a rapidly changing regulatory landscape, delegates heard during a panel discussion.
The panelists agreed that the SFDR proposals, which include new “sustainable”, “transition” and “ESG basis” categories, were a direct response to years of industry lobbying and promise to slash compliance costs and finally make it easier for real estate funds to attract institutional capital for ‘transition’ strategies that seek to improve the sustainability of existing property assets.
Melville Rodriguez, policy expert and head of real estate advisory at Apex Group, cautioned that the longevity of the simplified framework ultimately hinges on whether the industry can “win the hearts and minds of everyday folk” to counter the growing “anti-sustainability agenda” seen in recent European elections, turning the focus from enthusiasm to tangible “mutual gain”.
The proposed changes to SFDR come amid a wider shifting regulatory landscape, including the EU’s “Omnibus simplification package” streamlining corporate sustainability, including changes to the Corporate Sustainability Reporting Directive (CSRD), which can apply to Europe’s listed real estate companies.
Sophie Taysom, founder and director of sustainability consulting business Keyah, opened discussions by asking about the immediate, on-the-ground impacts of the rapidly shifting regulatory landscape: “Are you seeing with your clients continuing momentum? Are they going back?”
Christiane Conrads, partner and global real estate sustainability lead at PwC, said there had been a divergence in the real estate sector since the proposed changes. In April, the Commission voted to postpone compliance for the so-called ‘second wave’ of CSRD reporting and Conrads said that German mid-cap real estate firms had responded to this by stopping the immediate reporting exercise, while “continuing the strategy exercise” to develop their own approach to sustainability risks.
Conversely, international companies in regions like the Middle East were voluntarily adopting the rigorous double materiality assessment from the CSRD based on a conviction that the EU methodology would help them “tackle many problems of the transition” through intensive analysis of complex real estate value chains.
Robert Greenberg, head of sustainable finance at Segro, addressed how listed property firms should navigate the shifting regulatory landscape, stressing that internal strategic focus should ultimately guide compliance efforts, irrespective of regulatory changes. He said the core task was to “stick to our guns on what we know is material for business”, positioning companies to comply with both the new EU categories and the evolving, single-materiality-focused UK regime.
Responding to a question of “compliance fatigue”, Amélie Woltrager, lawyer and senior associate at Arendt & Medernach, said her clients – from asset managers to advisers – were experiencing “exhaustion” due to regulatory fragmentation. Woltrager explained that despite SFDR being a directly applicable regulation, its implementation varies widely because “each national regulator has its own interpretation”, creating a “mismatch” in cross-border transactions and complicating disclosure in pre-contractual documentation.
This constant uncertainty, exacerbated by new guidance issued monthly by authorities like the Luxembourg CSSF, has led to a “loss of interest” among some long-standing funds that are nearing the end of their cycle and find it difficult to suddenly align their operations with new sustainability objectives, she said.
Such frustration could potentially be offset by the new SFDR proposals. Rodriguez said the new categories were “wonderful news” because they created clearer, credible pathways to attract the institutional pension fund capital needed for crucial transition strategies, like decarbonising the built environment.
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