Sustainable finance rules: finding the right balance between simplification and ambition

Safeguarding access to robust and comparable ESG data

The Corporate Sustainability Reporting Directive (CSRD) was designed as a cornerstone of the EU’s sustainable finance agenda, ensuring that companies, investors and banks can rely on coherent and comparable data on environmental and social impacts.

However, the ongoing debate around the Omnibus proposal has raised concerns.

“What we see with the Omnibus proposal is a step back from the initial ambition of the sustainable finance framework,” warns Thomas Collin, Sustainability Adviser at the ABBL. “The risk is that banks could lose access to the very data they need to finance the transition.”

He notes that the proposed application thresholds could result in fewer companies being required to report, leaving institutions with incomplete or estimated data. “That is not simplification; it is complication,” he adds.

Sandrine Roux, Secretary General of the ABBL, calls for a pragmatic stance: “We advocate a proportionate approach — not necessarily fewer disclosures, but data that remain relevant and usable for our members.” She highlights that collecting sustainability information already represents a significant internal effort, and warns that slowing progress now could create long-term setbacks.

Reassessing the “do no significant harm” test

The EU Taxonomy, adopted in 2020, defines what qualifies as an environmentally sustainable activity. One of its most complex requirements, the “Do No Significant Harm” (DNSH) principle, ensures that an activity contributing to one sustainability goal does not harm another.

Changes proposed under the first Omnibus package, expected to apply from 2026, aim to ease the DNSH test and reduce reporting scope. While this could remove a barrier to alignment, stakeholders stress that transparency must remain a priority.

Rethinking sustainable product disclosures

The Sustainable Finance Disclosure Regulation (SFDR), introduced in 2021, was designed to increase transparency and reduce greenwashing risks. However, its first years of implementation revealed significant complexity and confusion, particularly for retail investors.

The European Commission’s upcoming SFDR 2.0 review seeks to address these issues, possibly shifting the framework from a disclosure regime to a labelling regime, a change also supported by Claude Marx, Director General of the CSSF, to enhance clarity and investor confidence.