Material sustainability risks, disclosure and regulation
The European Commission published proposals to change the regulatory framework for sustainable finance and related areas.
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Even before the release of the European Commission's "Omnibus" package of proposals to substantially change sustainable finance reporting requirements (mainly CSRD), sustainability due diligence (such as CSDDD), EU Taxonomy, carbon border adjustment mechanism and related areas a number of organisations and initiatives voiced their criticism.
The EU's objective to reduce the complexity of regulation for businesses can also be seen as a reaction to sustainbility policy changes in major countries.
It will be interesting to monitor over the coming weeks and months how negotiations in connection with these proposals develop.
Independent from changing regulation the material risks companies and investors face do not change.
The objective of analysts, investors and asset managers to identify material risks (related to ESG, sustainability or other areas) based on disclosure of financial and sustainability data will not change either.
Risks will be priced and companies and financial market participants will take this into account even if sustainability regulation is going to be reduced in the future.
Overall, lighter regulation will most probably have a substantial negative impact on climate change, the redirection of finance to more sustainable investments, decarbonisation strategies, and the energy transition.
More information on the Proposal for a Directive.