Investors defend sustainability disclosures as EU embarks on simplification omnibus

Thousands of investors managing trillions of assets have come out in defense of EU sustainability regulations like CSRD and CSDDD and urged legislators not to reopen negotiations.

Reminding that “investors are the key users of sustainability disclosures”, the group warns that reopening passed regulations like the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) risks creating regulatory uncertainty “and could ultimately jeopardise the Commission’s goal to reorient capital in support of the European Green Deal”.

The statement is signed by 211 organisations, including the Institutional Investors Group on Climate Change (IIGCC), the European Sustainable Investment Forum (Eurosif), the Principles for Responsible Investment (PRI) – each of which represents hundreds or even thousands of investors – as well as 162 investors managing approximately €6.6 trillion of assets and 49 service providers.

It comes just a few days after the EU Commission published its Competitiveness Compass, highlighting plans for an “unprecedented simplification” of sustainability reporting requirements. Full details of the EU’s so-called ‘omnibus regulation’ are expected to come out this month, but several member states have called for a reduction in the scope of CSRD and the indefinite postponement of CSDDD.

EU should focus on providing guidance

While overall in favour of simplifying and improving the coherence of the sustainable finance framework, the investors that signed the statement believe that instead of revisiting these regulations, “a more effective approach would be to focus on streamlining the technical standards and provide clear implementation guidance”.

They remind the Commission that the EU Taxonomy and its associated disclosures are already starting to have the desired impact by increasing transparency around sustainable investments, therefore promoting more capital flows. In their view, CSRD and CSDDD, once fully implemented, will accelerate this trend by providing investors with clear and comparable data.

“We must not lose sight of the outcomes these regulations are set to support: accelerating investment towards a more competitive and sustainable economy and enabling investors and other market participants to better manage the risks, impacts and opportunities by facilitating access to high-quality, comparable and reliable sustainability data,” they write.

Seven recommendations for successful implementation of sustainability regulations

The statement continues with seven recommendations for the European Commission as it embarks on its omnibus simplification exercise: preserve the principle and core substance of CSRD, CSDDD and the EU Taxonomy; consider their importance for facilitating the investment needed to support growth, competitiveness and sustainability; streamline requirements and address inconsistencies and implementation issues within technical standards; facilitate implementation by providing user-friendly guidance to companies; ensure interoperability between ESRS and international sectoral standards such as ISSB; and leverage and scale existing digital and technological solutions to reduce reporting costs and burdens.

“We recognise these ambitious policies have been rolled out quickly, and often in parallel, leading to implementation and usability challenges for market actors. We therefore support targeted actions by the Commission at the technical level to provide simplification, clarity and consistency across the framework,” the investors add.