• info@esgwise.org

Investors Sound Alarm on Omnibus Uncertainty

European Commission urged not to sideline stakeholders by rushing through new legislation without due process.

A new statement signed by more than 160 investors has underlined concerns around the EU’s forthcoming omnibus package and the impact it could have on the bloc’s sustainable finance rules.

Published today, the statement called on the European Commission to “preserve the integrity and ambition” of the EU’s sustainable finance framework during ongoing discussions on an ‘omnibus legislation’ to amend key regulations.

The statement also said that any attempt to remove inconsistencies across the different strands of EU sustainability legislation should be made within level 2 implementing measures, rather than within framework legislation put forward by the European Commission.

The European Securities and Markets Authority typically issues implementing guidelines for financial services legislation.

The omnibus package looks to reduce the sustainability reporting burden for companies by modifying the EU’s taxonomy for sustainable activities, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The commission is expected to publish more details about the omnibus on 26 February.

The statement was coordinated by industry associations Eurosif, the Institutional Investors Group on Climate Change (IIGCC), and the Principles for Responsible Investment (PRI). It gleaned 211 signatories representing €6.6 trillion (US$6.8 trillion) in AUM, including 43 asset owners and 119 asset managers.

“At this stage, investors are cautious about the omnibus package due to the lack of clarity on its direction and the potential implications on access to the information they need to make investments and engage with their holdings,” Leo Donnachie, Senior Policy Manager – Sustainable Finance at IIGCC, told ESG Investor.

Donnachie stressed that central concerns to the IIGCC’s investor members include the potential watering down of key requirements in the Taxonomy, CSRD, and CSDDD regulations, and the risk of compromising fundamental objectives of the sustainable finance framework, such as increasing transparency, tackling greenwashing and facilitating capital flows towards net zero.

He added that the omnibus package could alter implementation timelines and scope of companies captured by the three legislations, creating significant uncertainty within industry and making it harder for investors to get access to information needed for timely decision making.

“Investors we have been speaking to would welcome targeted efforts to address inconsistencies and enhance the overall usability of the framework without compromising its core objectives,” said Donnachie. “But changes to the overarching framing of the regulations could hinder investors’ ability to manage risks, identify opportunities, and channel capital towards decarbonisation and economic growth.”

The letter has been sent to relevant policymakers, Members of the European Parliament (MEPs), and representatives of EU member states. Its asset owner signatories include AkademikerPension, Brunel Pension Partnership, Church of Sweden, and KLP, while AXA Investment Management, Ethos Foundation, Impax Asset Management, and Nordea Asset Management are among the asset managers.

Investor action

Investors were also among the 90 signatories of a similar letter in December criticising the omnibus, coordinated by European law firm Frank Bold and the World Wide Fund for Nature (WWF). This letter said the organisations were “deeply concerned” over sustainability reporting being misrepresented as a threat to EU competitiveness.”

Donnachie said that competitiveness and decarbonisation should be seen as complementary rather than conflicting goals, adding that the EU has a “real opportunity to capitalise” on boosting investment in future growth industries and supporting the transition of key industries.

Concerns have also emerged over the political motivations behind the omnibus’ origins, its direction, its lack of detail, and the lack of opportunity for stakeholder involvement.

“Several concerns have been raised about the proposal’s process, particularly its lack of an evidence-based foundation and its lack of clarity, which contradict the commission’s own Better Regulation guidelines,” said Sebastien Godinot, Senior Economist at the WWF European Policy Office (WWF EU). “The timeline for the [publication of the] current proposal does not allow for adequate due process [and] there is insufficient time for necessary impact assessments and stakeholder consultations.”

Investors have not yet been consulted on the omnibus proposal. There is a behind closed doors consultation set to take place on 6 February, but just ten of the 69 invitees are NGOs. WWF EU was one of the NGOs to be invited, while four separate oil and gas companies were among the 31 practitioners invited, none of whom have publicly supported CSDDD.

“Investors should raise their concerns over the lack of transparency of a consultative process from the commission, by addressing the relevant cabinets and directly questioning their non-inclusion and lack of due process,” said Godinot. “This is the moment to be outspoken and go public in raising their concerns about the overall risks of this process.”

At an event hosted by Frank Bold last week, MEP Lara Wolters said that the solution to revitalise the EU economy should not be a “policy panic attack” or rushing to slash standards in a “race to the bottom” with the US and China, which the EU would lose.

“We’re shooting ourselves in the foot with an unprecedented bonfire of sustainability rules,” she added. “While we might have been promised simplification without deregulation, there is every indication that the commission is heading in the opposite direction.”

The IIGCC “broadly share[s] the concerns about the risks of a ‘regulatory bonfire’”, said Donnachie.

“The EU’s strength has always been in providing a predictable and stable environment for business and investment – we shouldn’t underestimate the importance of a policy environment where what you see is what you get,” he added. “In the context of policy environment, investors value certainty and predictability above all else.”

Ahead of 26 February, Donnachie urged investors concerned about the omnibus to collaborate with industry associations like IIGCC, Eurosif, and the PRI to amplify their message, engage directly with EU policymakers and relevant committees, and provide policymakers with tangible examples of how regulation is supporting their net zero alignment efforts.

The post Investors Sound Alarm on Omnibus Uncertainty appeared first on ESG Investor.

Leave a Reply

Your email address will not be published. Required fields are marked *