Efforts to make the EU's sustainable finance regulations work better for everyone are welcome, but investors need high-quality sustainability data and regulatory certainty, write Stephanie Pfeifer, Aleksandra Palinska, and David Atkin
Europe is entering a critical phase in its green transition, with major initiatives like the Clean Industrial Deal set to be unveiled in the coming weeks.
Investors are at the forefront of driving this transformation, but their ability to allocate capital effectively hinges on a stable policy environment and access to high-quality, comparable and reliable sustainability data – including on climate solutions, corporate transition plans, and implementation on the ground.
The sustainable finance framework developed over the past decade has been instrumental in providing this transparency.
This is why 163 institutional investors, supported by the Institutional Investors Group on Climate Change (IIGCC), the European Sustainable Investment Forum (Eurosif), and the Principles for Responsible Investment (PRI), are calling on policymakers to maintain the integrity and ambition of the sustainable finance framework in the upcoming Omnibus package. This includes the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD) and the Taxonomy Regulation.
While targeted, practical adjustments to improve usability and address technical inconsistencies are needed, wholesale changes to these regulations risk creating uncertainty and undermining investor confidence.
While the CSRD enhances and standardises corporate sustainability reporting, the CSDDD helps companies identify and manage risks connected to adverse impacts on human rights and the environment throughout their value chains. Crucial to industrial decarbonisation, the CSDDD mandates that companies of over 1,000 employees establish and implement transition plans, including climate targets.
Despite implementation challenges for both investors and companies, recent evidence suggests the rules are starting to work. European companies in 2023 and 2024 reported over €440 billion in Taxonomy-aligned investments.
Research indicates that firms with high Taxonomy alignment tend to deliver higher stock returns, emphasising the links between sustainable finance, competitiveness and growth.
This reinforces the importance of maintaining the ambition and integrity of these regulations.
To enhance usability, our joint statement calls on the European Commission to focus on technical amendments to reduce inconsistencies and provide clearer guidance to facilitate implementation.
The progressive introduction of EU sector-specific standards, in coordination with relevant international bodies – such as the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) – would help reduce duplication, ease reporting burdens and foster global interoperability. Efforts to streamline rules should be based on evidence from users' experience, designing changes based on assessing implementation efforts in cooperation with practitioners and other stakeholders.
As Mario Draghi aptly noted, competitiveness and decarbonisation are two sides of the same coin.
Sustainability goals and the transition to a net zero economy are not at odds with competitiveness and economic growth. They are essential for managing system-level risks, unlocking new investment opportunities, and ultimately fostering long-term economic resilience and prosperity.
Pursuing climate action and economic growth in tandem is not just possible, but necessary.
We urge EU policymakers to preserve the principles, aims, and core substance of the EU sustainable finance framework.
A robust and refined sustainable finance framework will drive growth, job creation, and industrial resilience, while sustaining the EU's Green Deal momentum and strengthening its competitive edge.
Stephanie Pfeifer is CEO at Institutional Investors Group on Climate Change. Aleksandra Palinska is Executive Director at Eurosif. David Atkin is CEO at Principles for Responsible Investment.
