BRUSSELS, Belgium, Nov 20, 2025 (BSS/AFP) - The European Commission said Thursday it wants to exclude companies involved in fossil fuels from financial products marketed as "sustainable" in the EU, a step long demanded by environmental groups and experts.

The move is part of EU proposals to revise the bloc's Sustainable Finance Disclosure Regulation (SFDR), introduced in 2021 to steer savers toward greener investments through a classification system for funds.

NGOs and experts had urged the EU executive in late September to overhaul what they called an overly vague and permissive framework, insisting at minimum that firms expanding fossil fuel activities be excluded.

The commission proposal appears to answer that call, by acknowledging that the current system could mislead investors and proposing a stricter three-tier classification as part of efforts to curb "greenwashing."

The first category, billed as "sustainable," would automatically exclude investments in companies "active in fossil fuels or high-emitting energy activities, or expanding their fossil fuel activities," according to a statement.

The second category, labelled "transition," would bar firms generating significant revenue from coal or expanding their fossil fuel activities.

Finally, a third category labelled "ESG basics" -- referring to environmental, social and governance criteria -- would exclude companies earning significant income from coal.

All categories would also factor in social and environmental impact criteria under the commission's proposal, which still needs approval by member states and the EU parliament.

The move follows steps by the EU's markets watchdog ESMA, which this year required funds using "sustainable" or "ESG" in their names to exclude companies deriving more than one percent of revenue from coal or more than 10 percent from oil.