Investors urge European Commission not to weaken sustainability rules

The European Commission will publish a proposal this month to simplify reporting requirements under sustainability policies, whose excessive complexity some businesses have complained about. Investors managing assets worth 6.6 trillion euros have urged the European Union not to weaken its sustainability rules.

The Commission is expected to present the Omnibus package on 26 February, which is intended to amend key sustainable finance regulations. More than 200 financial sector organisations, including 162 asset owners and managers that collectively manage assets worth 6.6 trillion euros, have signed a joint statement urging the European Commission to “preserve the integrity and ambition” of the EU’s sustainable finance framework.

Changes create uncertainty

Investors warn that any easing is likely to create legal uncertainty, threaten Europe’s long-term economic competitiveness and harm investment if the rules are reopened for a wholesale review.

In a joint statement, three investor groups—Eurosif, IIGCC and PRI—said a complete overhaul of the rules could backfire by making it harder to invest in industries Europe is seeking to attract.

They were backed by more than 200 other investors and financial sector organisations.

“Reopening these regulations in their entirety risks creating regulatory uncertainty and could ultimately undermine the Commission’s goal of redirecting capital to support the European Green Deal,” the statement said. It was also signed by investors including AXA Investment Managers and L&G Asset Management.

Boosting competitiveness

The Omnibus package is intended to boost Europe’s competitiveness and streamline regulations. Key sustainability legislation is expected to be revised, including the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

“According to the Draghi report, the EU is short of 800 billion euros in investment each year to meet its goals for industrial decarbonisation and competitiveness. Private capital is needed to bridge this gap. For investors to play their part, they need high-quality, reliable and comparable information from businesses, including information on sustainability risks and impacts,” said Aleksandra Palinska, executive director of Eurosif.

The Commission plans to simplify EU rules on corporate sustainability reporting, due diligence requirements—which oblige companies to check human rights and environmental issues across their supply chains—and a third policy that classifies climate-friendly investments.

Cutting red tape

The move comes as US President Donald Trump rolls back regulation in response to calls from struggling industries, Reuters reports.

EU officials said proposals due in February would include changes to ease the reporting burden on small businesses. Some member states, including Germany and France, however, want the EU to go further and postpone the rules’ implementation.

A minute after midnight Eastern Time, a 10% tariff on all Chinese imports entering the US took effect, and Beijing immediately responded with a 15% tariff on US coal and LNG and a 10% tariff on oil, farm equipment and trucks.

Leo Donnachie, IIGCC’s head of policy, said losing access to information on companies’ sustainability credentials could hinder investment as Europe seeks to compete with China and the US in clean technologies.

“Investors need access to this information to make decisions,” he said.

Others in the industry disagree. Current data requirements are “too much of a bureaucratic burden” for the sector, said Patricia Volhard, head of the European Funds Regulatory practice at law firm Debevoise & Plimpton.

Donnachie added that Brussels should consider streamlining the technical aspects of the sustainability rules, but postponing or overhauling them would create undesirable instability.