EU’s Proposed Rollbacks on Sustainability Reporting Threaten Green Goals: What You Need to Know

In a significant move for sustainable finance, over 200 financial institutions managing assets totaling €6.6 trillion have voiced their concerns to the European Commission regarding potential changes to sustainability reporting regulations. These changes, proposed under the EU’s upcoming “Omnibus package,” could jeopardize the region’s ambitious green goals and introduce critical policy uncertainty.

Concerns Over Sustainability Reporting Regulations

The coalition, which includes prominent asset owners, managers, and 49 service providers, fears that any dilution of current sustainability reporting standards could disrupt essential capital flows needed to achieve the EU’s environmental objectives. This statement was led by notable organizations such as the Institutional Investors Group on Climate Change (IIGCC), the European Sustainable Investment Forum (Eurosif), and the Principles for Responsible Investment (PRI).

The EU Commission’s Competitiveness Compass

This statement comes in response to the EU Commission’s recently published “Competitiveness Compass.” The roadmap aims to enhance Europe’s productivity and global competitiveness, particularly by reducing corporate administrative burdens, including those related to sustainability reporting.

Key Components of the Proposed Omnibus Package

A critical aspect of the Competitiveness Compass is the anticipated “Omnibus” package, set to be released later this month. This package seeks to significantly simplify obligations under several directives, including:

• Corporate Sustainability Reporting Directive (CSRD)
• Corporate Sustainability Due Diligence Directive (CSDDD)
• Taxonomy Regulation

Proposed changes could redefine small mid-cap companies to ease their reporting requirements and adjust the employee threshold for CSDDD applicability, potentially exempting up to 80% of businesses.

Maintaining Integrity in Sustainability Measures

While the investor coalition acknowledges the necessity of streamlining the sustainability framework to bolster the EU’s industrial competitiveness and decarbonization efforts, they stress the importance of preserving the “integrity and ambition” of existing regulations. They warn that drastic regulatory amendments could destabilize the investment landscape, hindering the flow of capital into the European Green Deal.

The Importance of Reliable Corporate Disclosures

Eurosif’s Executive Director, Aleksandra Palinska, emphasized the necessity of reliable corporate disclosures to enable investors to effectively contribute to sustainable growth. She referenced the Draghi report, which identifies a staggering annual investment gap of €800 billion needed to meet the EU’s industrial decarbonization targets.

Palinska cautioned against hastily modifying sustainability regulations, advocating instead for targeted support to assist companies in implementing these crucial measures efficiently.

For more on the EU’s sustainability initiatives, visit the European Commission’s Environment page.