Investors worth €6.6trn urge EU not to scale back ESG regs
Investors representing €6.6trn in assets have called on the European Commission not to bow to pressure to scale back the bloc’s ESG regulations.
The move comes amid alarm that the EU Commission’s upcoming Omnibus package, expected on 26th February, could lead to the wholesale revision of key sustainability requirements such as the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD).
While the taxonomy is meant to standardise green definitions, the CSRD obligates corporates to report on sustainability issues and CSDDD tackles ESG risks in global supply chains.
Reopening these regulations risks creating regulatory uncertainty and could ultimately jeopardise the European Green Deal, the three European investor groups - the Institutional Investors Group on Climate Change (IIGCC), the European Sustainable Investment Forum (Eurosif), and the Principles for Responsible Investment (PRI) – warn in a joint statement.
This is because the rules help investors make informed decisions to “manage risks, identify opportunities and ultimately reorient capital towards a more competitive, equitable, and prosperous net-zero economy”.
The investor groups still support the “the overall objective of simplifying and improving the coherence” of ESG rules, but argue that a “more effective approach would be to focus on streamlining the technical standards and provide clear implementation guidance.”
They say the increased transparency created by these regulations is already having a positive impact, highlighting evidence that by 2024, European companies had reported €440bn of Taxonomy-aligned capital expenditure - a figure expected to grow significantly.
With the EU facing an estimated annual investment gap of €750-800bn per year, the investors warn that watered down sustainability reporting standards could undermine “the long-term competitiveness of Europe's net-zero industry and its economic resilience”.
Both France and Germany, the EU’s two largest economies, have pushed to scale back ESG regulations due to concerns that they prevent companies in the bloc from competing freely with their peers in the US and Asia.
France called last month for a “massive” regulatory pause and urged EU officials to ensure that small and mid-sized companies aren’t unduly burdened by reporting rules. Germany wants the EU to delay the CSRD by two years and to water down several details.
Alexander Burr, ESG policy lead at Legal and General Investment Management, said: “As a global investor, we need access to high-quality, consistent, and comparable disclosures across markets. We are supportive of the European Commission’s efforts over recent years to develop a robust and ambitious sustainable finance framework that delivers on that.”
Philippe Zaouati, CEO of Mirova, said: "We are at a decisive turning point for sustainable finance. While climate concerns are often side-lined in the face of geopolitical and economic crises, it is imperative that we remain committed to our sustainability goals.”
