EU Financial Leaders Warn Against Overhauling Sustainability Rules, Citing Investment Risks

The Omnibus package that the European Commission is expected to introduce on February 26th to amend key sustainable finance and sustainability reporting rules, including the EU Taxonomy, CSRD and CSDD, could create legal uncertainty, jeopardise Europe’s long-term economic competitiveness and harm investment if the rules were reopened for a full overhaul, according to a group of over 200 financial sector players.

The group includes 162 asset owners and managers with €6.6 trillion in assets under management, who have signed a joint statement calling on the European Commission to “preserve the integrity and ambition” of the EU’s sustainable finance framework.

The Omnibus package aims to improve Europe’s competitiveness and simplify regulations

The call by investors, including Italian Anima SGR, Kairos Partners, Nextalia SGR and Sycomore AM, is supported by the IIGCC (Institutional Investors Group on Climate Change), Eurosif (European Forum for Sustainable Investment) and the PRI (Principles for Responsible Investment) who have urged EU politicians to focus on targeted changes to technical standards and clearer guidance for implementation.

According to the Commission, the Omnibus package aims to improve Europe’s competitiveness and simplify regulations, including the revision of key sustainability pillars such as the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

However, investors see the Omnibus regulations as “fundamental pillars of the EU sustainability policy architecture” and crucial to fostering long-term sustainability and economic growth in Europe. As explained in the joint statement, these rules enable investors to make informed decisions to “manage risks, identify opportunities and ultimately redirect capital towards a more competitive, fair and prosperous net-zero economy.”

The revisions, therefore, financial actors warn, must aim to effectively reduce reporting burdens and regulatory complexity, improving disclosure requirements and promoting a more coherent approach to the transition along the entire value chain. However, reopening the legislative debate by completely overhauling key sustainability requirements risks creating regulatory uncertainty and could ultimately undermine the Commission’s aim to channel investments in support of the European Green Deal.

“By maintaining the core principles of these regulations and addressing implementation challenges, the EU can strengthen its global leadership in sustainable finance,” said Stephanie Pfeifer , CEO of the IIGCC.

Investors see the Omnibus regulations as “fundamental pillars of the EU sustainability policy architecture”

The signatories support the Omnibus overall objective of simplifying and improving the coherence of the EU regulatory framework on sustainable finance, but argue that a more effective approach would be to focus on simplifying technical standards and providing clear guidance for implementation.

On the other hand, investors say, the increased transparency created by the Omnibus regulations is already having a positive impact, with European companies reporting €440 billion in capital expenditure aligned with the Taxonomy by 2024, a figure set to grow significantly.

But with an investment gap estimated at between €750 billion and €800 billion per year, initiatives such as the upcoming Clean Industrial Deal, which aims to “ensure the long-term competitiveness of Europe’s net-zero industry and its economic resilience,” could be jeopardized if sustainability reporting standards are weakened, the paper says.

“To achieve the EU’s decarbonisation and industrial competitiveness goals, the Draghi report identifies an annual investment gap of €800 billion,” said Aleksandra Palinska , Executive Director of Eurosif, “Private capital is crucial to fill this gap. Radical changes to the rules before their full implementation will create regulatory uncertainty and hinder investors’ contribution to sustainable growth.”

The statement, sent to Commission President Ursula von der Leyen and key EU Commissioners, stresses that “timely access to high-quality reporting is essential to inform investors’ decisions, supporting the reorientation of capital towards a more competitive net-zero economy.”

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(Featured image by Guillaume Périgois via Unsplash)

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