“Like swapping GPS for a paper map”: investors push back against EU’s Omnibus simplification
European asset owners have signed a joint statement urging lawmakers to protect core elements of CSRD and CSDDD
“They are telling us that the regulatory burden weighs heavily on them”, said European Commission President Ursula von der Leyen in a speech back in November 2024. ‘They’ in this case were businesses whose complaints had to do with regulatory burdens of the European Green Deal.
At the core of such complaints are Europe’s Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). That regulatory burdens were as issue would come as no surprise to European lawmakers, having read the Draghi Report.
In a bid to assuage such concerns, President von der Leyen announced, “One of our first steps in the new mandate will be a new omnibus legislation”. Then, in February this year Brussels put forth a proposal to simplify rules including CSRD and CSDDD.
Investors have pushed back. In a joint statement signed by 84 investors, 29 companies, 42 service providers and 43 supporting organisations has warned against weakening EU’s sustainability framework in a bid to simplify it.
Protect the core
Signatories to the statement include Danish pension funds AkademikerPension, PenSam and PKA, Spanish corporate pension fund GM Pensiones and Norway’s largest pension provider KLP. New Zealand’s Superannuation Fund has also signed on.
The statement’s key point of contention with the proposed changes is that simplification of rules needs to be pursued without weakening them. “Regulatory simplification can be achieved without compromising on the substance of sustainability rules”, the statement reads.
“We support simplifying the CSRD and CSDDD. At the same time, it’s important to keep the key rules. These ensure companies provide complete and reliable data for investment decisions and transformative actions”, said Günther Thallinger who serves on the board of Allianz SE with investment management and sustainability falling under his sphere of responsibility.
The proposed changes, according to signatories, are not in the long-term interests of investors. “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”, notes Aleksandra Palinska, executive director of Eurosif, a pan-European association.
A weakened rulebook disguised as simplication, the signatories warn, could hamper investment decisions that rely on CSDDD and CSRD data.
“While simplification is welcome, we are concerned that recent positions in the EU Council and Parliament could deprive investors of the vital information they would need to effectively allocate capital towards the EU’s economic objectives", says Nathan Fabina, chief systems officer at UN PRI.
The way out
The statement, which is still open to signatures, also includes recommended solutions that recognise the value of simplified rules.
The signatories recommend maintaining the double materiality approach of the CSRD as well as a phased-in inclusion of companies with over 500 employees in its scope.
For CSDDD, the statement argues in favour of retaining a crucial requirement for companies to adopt science-based climate transition plans. The suggested reform asks company transition plans to be shaped ‘through best effort’. Signatories have sought clarification and recommend maintaining a focus on means rather than the ends of transition planning.
“The current political trajectory in Brussels, especially in the European Parliament, risks taking us at least a decade backwards”, commented Tsvetelina Kuzmanova, EU Sustainable Finance Policy Lead at the University of Cambridge Institute for Sustainability Leadership.
Any pursuit of what the Budapest declaration termed “simplification revolution”, the statement says, must not come at the cost of eroding progress. “The promised competitiveness compass is starting to look like swapping GPS for a paper map”, adds Kuzmanova.
