GRESB and The Sustainable Finance Disclosure Regulation  

Updated on January 26, 2026.

SFDR targets financial market participants in the EU with a set of ESG disclosures aimed at providing transparency into the Principal Adverse Impacts (PAIs) of their investments.

One of the most debated aspects of the SFDR is how its Article 8 and 9 designations are often used as de facto marketing labels for investment funds. This issue has been the crux of multiple consultations on the regulation, and this classification system is expected to be significantly revamped in the SFDR’s upcoming review.

These articles refer to a set of disclosure requirements for financial products that promote ESG characteristics (Article 8) and for financial products that have sustainable investments as their objective (Article 9). However, these classifications have often been repurposed as marketing labels to signify the level of sustainability of investment products—which was not the intention behind these articles and cannot be suitably facilitated through their design.

Combined with limited guidance and unclear criteria, this ambiguous differentiation and inconsistent interpretation by fund managers has resulted in accusations of greenwashing and concerns that investors may be misled about the true sustainability of an investment. In turn, this ambiguity has often made it difficult for investors to compare funds based on their sustainability performance, and the inconsistent applicability of the labels can make it difficult to clearly identify sustainable financial products for targeted investments.

The SFDR’s comparability challenge reinforces the complementary value of the GRESB Assessment in clearly and consistently differentiating best performing funds through its process of benchmarking, ranking, and scoring. GRESB provides a standardized universal language to assess the sustainability characteristics of a financial product and equips investors with the tools to clearly compare, identify, and track sustainability performance through an industry-tailored lens of high-quality and validated asset-level data.

The SFDR has posed specific challenges for the real estate industry due to a variety of incompatibilities between the framing of the regulation and the realities of this asset class. This includes challenges associated with reporting to the real estate-specific PAI indicators and the difficulty of classifying real estate funds as sustainable under Article 9. Namely, the real estate PAI indicators have been criticized for being too complex and not easily harmonized across the EU, whilst Article 9 classification is deemed incompatible with most real estate funds due to the requirement that 100% of assets meet sustainable investment criteria.

Although the SFDR establishes an important regulatory baseline, these structural challenges make it difficult for investors to clearly assess the sustainability of real estate funds through the lens of the SFDR as the regulation was not designed to clearly reflect the characteristics of this industry. This is especially important given that real estate is a unique asset class that generates significant sustainability impacts spanning energy consumption, water usage, waste generation, and a variety of additional elements that are best understood with reference to aspects such as location and property type, amongst other factors.

These challenges reinforce GRESB’s unique value of being tailored to the needs and characteristics of the real estate industry, with the GRESB Standards reflecting the most materially relevant information for real estate investors. Accordingly, the GRESB Assessments represent a specialized framework calibrated to the realities of this asset class, thereby providing customized output that is designed to empower investors with actionable insights that are drawn directly from asset-level data. In the absence of an SFDR framework that is purposefully crafted for real assets, the GRESB Assessment provides valuable analytics for both managers and investors alike.

In November 2025, the European Commission proposed a set of significant revisions to the current version of the SFDR, marking a shift away from being a general disclosure regulation toward a more prescriptive product categorization and labelling regime. These changes include a proposal to replace the current Article 6/8/9 disclosure system with three new and distinct product categories: a “Transition” category (new Article 7); an “ESG basics” category (new Article 8); and a “Sustainable” category (new Article 9). Each newly proposed category is accompanied by more exacting requirements, including a mandatory list of exclusions and an associated list of permissible investment types that are deemed to contribute to the sustainability objectives associated with each respective product label.

Notably, for the new Article 8 “ESG Basics” category, the regulator is proposing that, in order for a financial market participant to claim that their financial product integrates sustainability factors into their investment strategy, it must demonstrate that the fund has an ESG rating “that outperforms the average rating of the investment universe or the reference benchmark” (Article 8[2a]). This means that when the SFDR 2.0 comes into force (likely 2028 or later), GRESB members may be able to use their GRESB Rating to demonstrate that their portfolio outperforms its peers on ESG metrics and therefore integrates sustainability factors into its investment strategy, consistent with the requirements of an Article 8 fund.

This development further enhances the relevance of the GRESB Assessment by directly embedding the GRESB Rating into one of the newly proposed SFDR product categories. As such, the EU Commission is paving the way for the GRESB Rating to become a regulatorily recognized means to demonstrate sustainability within the SFDR Fund classification framework. GRESB will continue to monitor the progress of this proposal as it moves through the EU’s legislative process and will update GRESB members on its final status, which is expected later this year.