SFDR fossil fuel capex KPI tentatively welcomed by data providers
Morningstar Sustainalytics, Clarity AI and FTSE Russell say new fossil fuel KPI tabled by MEPs could see data and methodological challenges.
Source: Responsible Investor · October 5, 2026 at 9:32 PM · AI-assisted report
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EUROPEAN UNION, 6 OCTOBER 2026 —
Major European data providers warn of potential data and methodological hurdles as MEPs propose new fossil fuel capital expenditure disclosure rules under the Sustainable Finance Disclosure Regulation (SFDR).
The proposed Key Performance Indicator (KPI) tabled by Members of the European Parliament (MEPs) could face significant implementation challenges, according to three leading sustainability data firms. Morningstar Sustainalytics, Clarity AI, and FTSE Russell have raised concerns over the feasibility of tracking fossil fuel capex disclosures, particularly for smaller asset managers and funds.
The proposed KPI requires asset managers to disclose the proportion of investments in companies whose business models are dependent on fossil fuels, as well as the proportion of capital expenditure (capex) allocated to fossil fuel projects. Morningstar Sustainalytics noted that while the intent is clear, the practical execution—particularly around data granularity and consistency—remains uncertain. "The challenge lies in ensuring that the data collected is both accurate and comparable across different asset managers," a spokesperson said.
Clarity AI highlighted that many funds may struggle with the methodological rigor required to distinguish between fossil fuel-related capex and broader capital investments. FTSE Russell echoed these concerns, stating that the lack of standardized reporting frameworks could lead to inconsistencies in compliance.
The proposed rules, if adopted, would apply to all asset managers and funds operating within the European Union, including those with exposure to Malaysian energy firms listed on Bursa Malaysia. While the MEPs’ proposal is still under review, industry stakeholders are closely monitoring its progression, as it could set a precedent for global ESG disclosure standards.
The European Commission is expected to finalize its position on the SFDR amendments by early 2027, with potential implications for regional financial markets.
Related: Morningstar Sustainalytics · European Parliament · European Union
Malaysia Impact
4/10The proposed SFDR rules would apply to EU asset managers with exposure to Malaysian energy firms listed on Bursa Malaysia, potentially increasing disclosure burdens and affecting ESG-driven capital flows into the Malaysian energy sector.
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