Investors tell EU not to water down sustainability laws through Omnibus package

The EU Commission is expected to introduce an Omnibus Package to amend and consolidate key sustainable finance regulations on 26 February, and investors say this is a bad idea. The measures affected will be key sustainability laws, including the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD). Investors warn that this move is likely to create legal uncertainty, jeopardise Europe’s long-term economic competitiveness rather than improve it, and harm investment if rules are reopened for wholesale revision. More than 200 financial sector actors, including 162 asset owners and asset managers with a combined €6.6trn assets under management, have signed a joint statement calling on the EU Commission to “preserve the integrity and ambition” of the EU’s sustainable finance framework. The effort is led by the Institutional Investors Group on Climate Change (IIGCC), the European Sustainable Investment Forum (Eurosif) and the Principles for Responsible Investment (PRI). These groups urge EU policymakers to focus on targeted changes to technical standards and give clearer implementation guidance. The groups state that the Omnibus package purports to enhance Europe’s competitiveness and streamline regulations. However, investors say these regulations are “fundamental cornerstones of the EU’s sustainability policy architecture” and are crucial for fostering long-term sustainability and economic growth in Europe. This is because, as the statement argues, the rules facilitate investors to make informed decisions to “manage risks, identify opportunities and ultimately reorient capital towards a more competitive, equitable, and prosperous net-zero economy”. While recognising the need for targeted improvements, the joint statement emphasises the importance of long-term policy stability and highlights the dangers of wholesale reopening of the three laws that could lead to a significant weakening of corporate sustainability disclosures, which are essential for investment decisions. Signatories “support the overall objective of simplifying and improving the coherence of the EU sustainable finance framework”. But they also argue that a “more effective approach would be to focus on streamlining the technical standards and provide clear implementation guidance.” In their statement, investors say the increased transparency created by these regulations is already having a positive impact. They highlight evidence that by 2024, European companies had reported €440bn of taxonomy-aligned capital expenditure – a figure they claim is expected to grow significantly. With the EU facing an estimated annual investment gap of €750bn-800bn per year, investors warn that initiatives such as the forthcoming Clean Industrial Deal, which aims to “ensure the long-term competitiveness of Europe’s net-zero industry and its economic resilience”, could be undermined if sustainability reporting standards slide. The intervention, which has been shared with Commission President Ursula von der Leyen and key EU commissioners, stresses that “timely access to high-quality and comparable reporting is a prerequisite to inform and guide [investor] decisions”. Aleksandra Palinska, executive director at Eurosif, said: “For the EU to reach its industrial decarbonisation and competitiveness objectives, the Draghi report identifies an annual investment gap of €800bn. Private capital is needed to bridge this gap. To play their role, investors need quality, reliable and comparable corporate disclosures, including on sustainability risks and impacts. EU rules on corporate sustainability reporting have been expected to fill the existing data gap. Sweeping changes to these rules, before they are fully implemented, will create regulatory uncertainty and are likely to hinder the contribution investors can make to sustainable growth. Instead, the focus should be on supporting companies to implement the rules effectively, and if necessary, targeted adjustments of rules at the technical level.” Héléna Charier, head of SRI solutions at La Banque Postale Asset Management, said: “Corporate sustainability disclosure rules are essential to enabling investors to efficiently allocate capital towards the most sustainable companies and projects, financing the EU’s energy transition while also identifying and managing sustainability risks in their portfolios as part of their fiduciary duty. While technical optimisations and further assistance to the market in implementing the framework would be welcomed, maintaining a robust and predictable corporate and financial disclosure framework is crucial for advancing a sustainable European financial system that supports European competitiveness.”

Investors tell EU not to water down sustainability laws through Omnibus package

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