Integrity and ambition of EU's sustainable finance framework at risk
Over 200 financial sector actors, among them 163 asset owners and asset managers representing a combined €6.6 trillion assets call on co-legislators to upload the ambition.
Photo credit: George C / Unsplash+
Yesterday, the European Commission presented an Omnibus proposal which includes plans for fundamental changes to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the delegated acts of the EU Taxonomy Regulation. These rules are core elements of the EU sustainable investment framework, based on the fundamental principle of double materiality. Together they help investors to manage risks, identify opportunities, and ultimately reorient capital towards a more competitive and sustainable economy.
The European Sustainable Investment Forum (Eurosif) warns that the amendments to CSRD and CSDDD, if adopted in the proposed form, will weaken EU sustainability disclosures and undermine legal certainty for investors and businesses. The proposed rollbacks risk hindering the contribution of investors to scaling-up investments for industrial decarbonisation and growth under the Clean Industrial Deal and risk damaging the EU’s long-term competitiveness.
Nathalie Dogniez, Eurosif Chair, commented: “The Commission’s proposal to reopen the CSRD for renegotiation creates legal uncertainty for investors and businesses, and harms the first movers who have already prepared their first sustainability reports or started working towards compliance. The ability of out-of-scope companies to raise finance is likely to be hindered”.
Aleksandra Palinska, Executive Director at Eurosif, said: “The proposal aims to reduce the number of in-scope companies by over 80%. Drastic changes to the scope of sustainability reporting rules will limit investor access to comparable and reliable sustainability data and impair their ability to scale-up investments for industrial decarbonisation and long-term growth. Voluntary reporting from companies will not fill this data gap.”
Commenting on the proposals for changes to the Corporate Sustainability Due Diligence Directive, she further added: “Climate transition plans are necessary for investors to assess the credibility of companies’ decarbonisation trajectories. Deleting requirements for the largest EU companies to implement transition plans and watering down the rules on environmental and human rights due diligence across their value chain would detrimentally impact the ability of investors to allocate capital for industrial decarbonisation, to conduct forward-looking risk assessments and to support the transition to sustainable growth.”
In a recently published statement, investors have been calling on the EU Commission to “preserve the integrity and ambition” of the EU’s sustainable finance framework. The statement was developed together by Eurosif, IIGCC and PRI, and signed by over 200 financial sector actors, including 163 asset owners and asset managers with a combined €6.6 trillion assets under management.
With the proposal now heading for negotiation in the European Parliament and Council of the EU, we call on EU co-legislators to uphold the ambition of the CSRD, CSDDD and EU Taxonomy, which are cornerstones of the EU sustainable finance framework. We also stand ready to help find solutions for the simplification of these rules, while still preserving their integrity and ability to deliver on their objectives.
More information on Eurosif.