What fund managers, impact investors and real-economy operators need to understand about the regulatory wave arriving between 2026 and 2028
The European regulatory environment for private capital is going through one of its most active periods in a decade. Five distinct frameworks are either landing now, being overhauled, or about to reshape how funds are structured, marketed, reported, and classified across the EU. None of them exists in isolation. Together they describe a direction: more transparency, more accountability, stricter definitions, and at the same time a genuine effort to simplify compliance burdens that had grown unwieldy.
For funds operating in real-economy sectors, impact-adjacent strategies, or cross-border structures, the implications are concrete. Here is what is actually happening and what it means.
1. AIFMD II: the alternative fund manager directive gets teeth
In force: April 16, 2026
The Alternative Investment Fund Managers Directive II, Directive EU 2024/927, is required to be transposed into national law by April 16, 2026 across all EU Member States. This is not a replacement of the original 2011 framework. It is a targeted upgrade, but several of the changes have real operational weight.
The most immediate change affects open-ended funds. AIFMD II requires open-ended AIFs to select at least two liquidity management tools from a prescribed list, incorporating these into the relevant fund documents. These include redemption gates, extension of notice periods, and swing pricing. Suspension of subscriptions and redemptions and side pockets should also be available for exceptional circumstances. For managers of evergreen and semi-liquid structures, this is directly relevant. The tools are available but their selection and documentation now needs to be explicit and defensible.
On substance and delegation, the rules tighten. AIFMD II introduces stricter substance requirements for newly authorised AIFMs. Each firm must appoint at least two senior managers who reside in the EU, work full-time for the business, and possess the necessary skills and expertise to perform or oversee retained functions. The delegation question is also addressed more assertively. Managers need to evidence stronger control frameworks and demonstrate that key decision-making capabilities are retained within the AIFM, with the emphasis on ensuring that delegation structures are supported by genuine substance rather than functioning as a purely administrative arrangement.
For non-EU managers marketing into Europe, the reach is narrower but still relevant. Enhanced disclosure and reporting requirements will affect a wider range of funds, including funds registered under national private placement regimes across the EU.
The reporting timeline is worth noting. The enhanced supervisory reporting goes live with AIFMD II, but ESMA’s new reporting technical standards, which will reshape the templates, are due by April 2027. That means new reporting content arrives in 2026 while the fully refreshed templates follow a year later.
In plain terms: if you manage an open-ended or evergreen fund authorised in the EU, your documentation, liquidity tool selection, and substance arrangements need to be in order by April 2026. The compliance burden is real but manageable. The spirit of the directive is greater transparency and stronger governance, which impact-focused funds should be able to demonstrate naturally if their operations are genuinely substantive.
2. SFDR 2.0: the end of Article 8 and 9 as we know them
Proposed November 2025. Expected application: 2028
The Sustainable Finance Disclosure Regulation has been, since its 2021 introduction, simultaneously the most influential and the most contested piece of EU sustainable finance legislation. It was designed as a disclosure framework. It became, in practice, a product classification system. Funds rushed to claim Article 8 or Article 9 status as a marketing badge, often without the substance to back it up. A comprehensive review by the European Commission found that the current framework results in disclosures that are too long and complex, making it difficult for investors to understand and compare the environmental or social characteristics of financial products. Moreover, the SFDR has effectively been used as a de facto labelling system, causing confusion, particularly for retail investors, and increasing the risk of greenwashing and mis-selling.
The proposed overhaul is significant. SFDR 2.0 introduces a new categorisation system for ESG products, repeals the current SFDR regulatory technical standards, removes certain entity-level obligations, and amends the PRIIPs Regulation to ensure consistency in disclosures to retail investors.
The new structure replaces the Article 6, 8 and 9 architecture with three categories: Sustainable, Transition, and ESG Basics. All categories include a mandatory minimum investment commitment aligned with the label, set at 70%, a compulsory list of exclusions, and a set of permissible investments that operationalise the objectives.
The naming and marketing rules tighten considerably. Only products that qualify under one of the new categories will be permitted to use sustainability-related terms in their names or promotional materials. This is a direct response to the greenwashing problem and it has significant implications for any fund currently carrying ESG or sustainability branding without meeting the new thresholds.
Disclosure itself gets simpler in form but stricter in substance. The two-page templates are short, highly standardised summaries that say, in plain language, what the product’s category claim is, how the strategy works, how the product meets the 70% threshold, which exclusions apply, the key indicators or targets used to track delivery, and the main sustainability risks.
One notable change for private funds: there is an exemption available only for closed-ended funds that were created and distributed before SFDR 2.0 comes into effect. No general grandfathering or transition relief applies, and no exemption exists for alternative investment funds offered exclusively to professional investors.
The legislative timeline means this is not yet law. The legislative process may not be completed until late 2026 or early 2027, with the regulation applying 18 months after it enters into force, making 2028 the current timeline for implementation. But the direction is clear enough to act on now. If your fund makes sustainability claims, those claims need to be anchored in something measurable and defensible under the new framework. The era of soft sustainability labelling is ending.
3. The Omnibus package: CSRD and CSDDD pull back from overreach
In force: March 18, 2026. Transposition by member states: March 2027
In February 2025, the European Commission did something unusual. It proposed to substantially reduce the scope of sustainability reporting requirements it had spent years building. The Corporate Sustainability Reporting Directive, which had been set to cover tens of thousands of European companies across multiple waves, was significantly scaled back. The Omnibus package proposes to apply the CSRD only to the largest companies, those with more than 1,000 employees, focusing sustainability reporting obligations on the companies most likely to have the biggest impacts.
The CSRD’s scope is narrowed by raising its thresholds to companies with more than 1,000 employees and above €450 million net annual turnover. The previous framework would have captured companies an order of magnitude smaller. Around 80% of companies are removed from CSRD scope under the revised framework.
The Corporate Sustainability Due Diligence Directive, which would have required large companies to conduct human rights and environmental due diligence across their entire value chains, is also scaled back. The CS3D’s scope is narrowed to companies with more than 5,000 employees and above €1.5 billion net turnover. Critically, the requirement to implement climate transition plans is removed entirely, replaced with an obligation to report on plans without having to follow through on them.
For investors, the consequences flow in two directions. On one hand, compliance relief: portfolio companies that were preparing for CSRD reporting obligations may now fall out of scope, reducing the data collection burden. On the other hand, the data that impact investors relied on to make investment decisions and populate their own disclosures under SFDR may become harder to obtain. The chain of mandatory reporting from corporate to fund level is now shorter and less certain.
The Omnibus is already law. For funds backing companies below the new thresholds, the implication is simple: you can no longer assume the CSRD will deliver the sustainability data you need from your portfolio. You will need to collect it directly or rely on voluntary reporting frameworks. For funds above the threshold, the existing obligations largely remain.
4. ELTIF 2.0: private markets open to a new investor base
In force: January 2024. RTS applicable: October 2024
The European Long-Term Investment Fund structure was introduced in 2015 to channel private capital into long-term infrastructure, real assets, and SME financing. For its first eight years, it barely registered. No more than a hundred ELTIFs had been launched for a total of approximately €2.4 billion raised, domiciled in only four countries.
ELTIF 2.0 changed the calculation. In 2024 alone, a record 55 new ELTIFs were launched, more than double the previous high in 2021. The total ELTIF market volume reached approximately €20 billion by the end of 2024, representing a massive increase from the previous year.
The reform expanded what ELTIFs can invest in, removed the minimum investment threshold that had previously kept retail investors out, introduced semi-liquid structures with periodic redemption windows, and created an EU-wide passport allowing cross-border marketing to retail and professional investors alike. The revised regime makes ELTIFs more accessible and attractive for investors, removing existing hurdles and enabling ELTIFs to be marketed to investors across the EU. ELTIF 2.0 democratises private investing by opening the door to asset classes, projects and investment strategies previously only accessible to institutional investors.
For real-economy fund managers, this matters in a specific way. The ELTIF label creates a route to retail capital that previously required either a public listing or compliance with complex private placement rules in each jurisdiction. An evergreen fund structured as an ELTIF can now be marketed across 27 member states to qualified retail investors, with standardised documentation and a passporting framework that removes much of the distribution friction.
Return expectations reported by surveyed asset managers anticipate net IRRs of 10 to 15% for private equity, 7 to 9% for private debt, and 5 to 9% for infrastructure. Sustainability is increasingly central to the ELTIF value proposition, with most new launches in 2024 and 2025 adopting at least Article 8 status.
The ELTIF is not right for every fund. It comes with investment restrictions, diversification requirements, and governance obligations that do not suit every strategy. But for managers of real-asset strategies in food, agriculture, and infrastructure, it is worth understanding properly. The investor base that was previously unreachable is now, structurally, accessible.
5. The Savings and Investments Union: the architecture behind everything else
Strategy published March 2025. Ongoing legislative programme through 2026 and beyond
Behind the individual directives sits a broader strategic shift. An estimated €10 trillion of household savings are currently held in the EU in low-yield bank deposits rather than being invested in capital markets, where potential returns could be higher. This mismatch prevents savings from being used effectively to support business investments and the broader real economy.
The Savings and Investments Union, rebranded from the Capital Markets Union in 2025, is the Commission’s framework response to this problem. It is not a single regulation. It is an ongoing programme of legislative and structural interventions designed to connect European savings to European investment at a scale the current fragmented market cannot achieve. The SIU outlines four interrelated categories of policy measures aimed at encouraging retail savers to hold more savings in capital-market instruments, expanding financing options for firms, strengthening market infrastructure, and advancing supervisory convergence.
For private fund managers, the most relevant components are the review of the EuVECA regulation, expected by Q3 2026, to make the label more attractive including by broadening the scope of investable assets and strategies, and the planned measures to support secondary liquidity for private company shares. The Commission is proposing by Q3 2026 measures to support exits by investors in private companies, possibly through multilateral intermittent trading of private company shares. This would be a meaningful structural change for evergreen and long-hold private equity strategies, where the absence of a secondary market has historically been a significant investor concern.
The broader ambition of the SIU is the integration of EU capital markets to a point where a fund domiciled in Luxembourg can reach an investor in Portugal as easily as one in Paris. That is not yet the reality. But the direction of travel is clear and the legislative programme is active.
What this means taken together
Five frameworks. Five different timelines. One consistent direction.
European private capital is being asked to be more transparent about what it claims, more substantive in how it operates, more disciplined in how it manages liquidity and leverage, and more accessible to a wider base of investors. The compliance burden is real. But so is the opportunity.
Funds that already operate with genuine substance, honest impact claims, proper governance, and real-economy investment strategies are well positioned to meet these requirements without the painful reclassification exercise that faces funds which used SFDR labels loosely or built delegation structures on thin substance.
The regulatory wave is not hostile to impact investing. It is hostile to the version of impact investing that was about the label rather than the work. For those doing the actual work, the direction of travel is, on balance, favourable.
