On 26 May, INREV submitted its response to the European Commission’s call for evidence on the Sustainable Finance Disclosure Regulation (SFDR), highlighting key challenges for the non-listed real estate sector and advocating for a more practical, sector-sensitive regulatory framework.
We were closely involved in developing an aligned industry model response among a large group of real estate associations and other stakeholders and our response follows the model response.
INREV reiterated support for the goals of SFDR in enhancing transparency, comparability, and integrity in sustainability disclosures, but highlights that implementation has been complex and costly, particularly for the real estate sector. Here are seven main points from the response:
- Definition of Sustainable Investment
There is ongoing confusion in the market, especially in real estate, due to unclear definitions and the flexibility to set custom thresholds. INREV calls for simplified, clearer definitions, sector-specific indicators, and structured product categorisation, including a proposed new “transition investment” category for assets with credible improvement plans (e.g. EPC upgrades).
- Principal Adverse Impacts (PAIs)
PAIs are challenging to apply to real estate due to data gaps and ambiguous guidance. INREV recommends focusing on material indicators, sector-specific standards, and international harmonisation of energy ratings. Proportionality and standardised reporting frameworks are key to reducing confusion and costs.
- Data Gaps and Access Barriers
Barriers to accessing energy/emissions data (e.g. due to lease structures) hinder compliance. INREV suggests mandatory tenant-landlord data sharing (e.g. modelled on France’s Décret Tertiaire) and allowing proxies when direct data is unavailable. Further clarity is needed on reporting obligations for complex real estate ownership structures, including non-investor vehicles.
- Do No Significant Harm (DNSH) and Embodied Carbon
INREV stresses the importance of giving equal weight to embodied and operational carbon, advocating for lifecycle emissions metrics. Current rules incentivise new builds over refurbishments, contrary to EU renovation goals. DNSH assessments should be clearly defined, simplified, and promote energy retrofits.
- Transition to a Categorisation System
INREV backs the move from Articles 8/9 to a new product classification system (e.g. Sustainable, Transition, ESG-aligned). This would enhance clarity, reduce greenwashing, and better reflect real estate strategies. A transitional period and possible grandfathering of closed-end funds is recommended.
- Interoperability with other EU and international frameworks
INREV urges full coherence between SFDR, CSRD, the EU Taxonomy, and international frameworks (e.g. UK SDR, IFRS). Real estate managers need streamlined, interoperable requirements to reduce duplication and reporting burdens.
- Recognition of Impact Investing in SFDR
Current SFDR definitions neglect impact investing as a distinct strategy. INREV proposes recognising it through principles-based criteria focusing on intentionality, impact measurement, and investor contribution.
INREV supports the Commission’s review and offers concrete, sector-specific recommendations to improve SFDR’s effectiveness and usability in the real estate sector, while ensuring it meets its original goals.
Download the full response below.
Response to European Commission Call for Evidence on the Sustainable Finance Disclosure
Published on 26 May 2025