€6.6 Trillion Investor Group Warns Against Rolling Back EU Sustainability Reporting Regulations
A group of more than 200 financial services firms and organizations, including investors representing €6.6 trillion in AUM, announced the release of a new investor statement, warning the European Commission that easing its key sustainability reporting regulations in its upcoming “Omnibus package” proposal could lead to significant policy uncertainty, and risk the flow of capital towards the EU’s environmental sustainability goals.
Signatories to the statement, published by sustainable finance and investment-focused organizations Institutional Investors Group on Climate Change (IIGCC), the European Sustainable Investment Forum (Eurosif) and the Principles for Responsible Investment (PRI), include more than 160 asset owners and managers, in addition to 49 service providers and other supporting organizations.
The statement follows the release last week by the EU Commission of its “Competitiveness Compass,” its new roadmap aimed at boosting Europe’s productivity and global competitiveness, including several actions targeting reducing administrative and reporting burdens on companies.
Among the first initiatives to be undertaken under the new roadmap is an “Omnibus” package, set to be proposed later this month, which the Compass said will “cover a far-reaching simplification in the fields of sustainable finance reporting, sustainability due diligence and taxonomy.” Key regulations expected to be targeted for simplification include the EU’s Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and Taxonomy Regulation.
Key proposals to simplify sustainability disclosure requirements for companies include the creation of a new definition of small mid-cap companies, encompassing thousands of EU businesses and described as “bigger than SMEs but smaller than large companies,” which will be subject to less complex sustainability reporting and due diligence requirements than larger companies. Additionally, recent proposals submitted to the Commission by France and Germany called for measures including raising the threshold of the CSDDD to cover only companies with more than 5,000 employees (effectively removing roughly 80% of businesses from the CSDDD obligations), delaying implementation of the CSRD requirements for smaller companies, and holding off on sector-specific sustainability reporting requirements.
While welcoming the objectives of simplifying and improving the EU sustainable finance framework underlying the CSRD, CSDDD and Taxonomy regulations, the investor statement calls on the EU Commission to “preserve the integrity and ambition” of the regulations, and warns that
moves to change the framework could impact competitiveness and the investment environment, and the ability to channel capital to support the EU’s environmental goals.
The statement said:
“Reopening these regulations in their entirety risks creating regulatory uncertainty and could ultimately jeopardise the Commission’s goal to reorient capital in support of the European Green Deal.”
The statement included a series of proposals supporting the initiative to simplify and ease implementation of the sustainability disclosure regulations, including streamlining the requirements and addressing inconsistencies within the regulation’s underlying technical standards, providing implementation resources such as Q&As, guidelines and recommendations to facilitate implementation, ensuring interoperability between the European Sustainability Reporting Standards (ESRS) and standards such as the ISSB, GRI and SASB, and scaling digital and technological solutions to help reduce reporting costs and facilitate improved harmonization of disclosures.
Eurosif Executive Director Aleksandra Palinska said:
“For the EU to reach its industrial decarbonisation and competitiveness objectives, the Draghi report identifies an annual investment gap of €800 billion. 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.”
Click here to access the statement.
