"What we ask from Von der Leyen’s Omnibus initiative"

In her presentation, the Commission President stressed that the content of the legislation was correct, but acknowledged that it requires a great deal of information, with some inconsistencies and duplication. It is no simple task to simplify while maintaining what already exists.

Looking back, we have come from a European Commission marked by intense regulatory activity in the sustainability field. In 2019, then First Vice President of the European Commission, Frans Timmermans, announced the European Green Deal, which led to major legislative initiatives. Among them, the European Climate Law and its ambitious climate targets, the ‘Fit for 55’ - the package of proposals designed to revise and update European legislation of energy and climate, and launch new initiatives to guarantee that the policies are in line with the goal of reducing greenhouse gas emissions in 2030 by at least 55 percent from 1990 levels.

As for the financial sector, the Sustainable Finance Action Plan was launched in 2018 and reviewed in 2021 with over 50 measures (regulatory or of another nature) designed to mobilize capital for the transition to a low carbon economy. It aims to ensure the utmost transparency to support decision-making based on ESG criteria, and guarantee financial stability through the appropriate identification and management of risks stemming from climate change.

The result was a framework that, while necessary to propel the transition, is currently overly complex and not without inconsistencies. Therefore, recent announcements regarding the future simplification of important measures such as European taxonomy, non-financial reporting rules and due diligence obligations for social and environmental issues, are welcome. These announcements align with the objectives of the new Commission, which took office on December 1, 2024. The Commission has announced its intention to continue working toward the goals set in the European Green Deal, and stressed that it will focus its efforts on promoting European competitiveness. To this end, it will rely partly on the recommendations of the famous reports by Enrico Letta ‘Much more than a market’ and ‘The future of the European competitiveness’ by Mario Draghi.

The publication of the Omnibus initiatives is officially expected on February 26th, although there are those who say it could be several more weeks. Until then, many comments are being made and numerous issues remain unresolved. Among other issues, it is important to note that:

• Any announcement of simplification is more than welcome, especially concerning excessively complex disclosure requirements that have not proven their usefulness. This is the case of the Green Asset Ratio (GAR), which measures the proportion of a credit institution’s assets that meet the taxonomy criteria. Its calculation is extremely difficult and the result is not meaningful, cannot be compared across institutions and it is not used by investors.
• Simplification is needed, but it cannot occur without taking into account that bank reporting relies on information from our customers. Therefore, reducing the regulatory burden for the financial sector should be consistent with that of companies. It would not make sense to ask financial institutions to disclose data that their clients are not required to report, especially when it comes to SMEs. In addition, any exercise in simplification must ensure that the information disclosure requirements which are necessary for banks to properly manage the risks associated with climate and the environment are maintained for companies.
• An element that should be key in the context of the Omnibus initiative is ensuring the convergence of regulations on an international level. Having to apply different standards in different geographies means excessive costs and additional complexity, which results in a loss of competitiveness for European companies, especially those operating outside of the EU. This goal could be accomplished without having to reduce Europe’s climate and environmental ambitions, for example through a common global base, with the possibility of adding certain requirements in more demanding or advanced countries in terms of sustainability.
• The timing is important. It is important to explain how this proposal will align with the other initiatives. Will the transpositions underway stop? Will the review clause on financial services included in the Due Diligence Directive, for example, be postponed? Will the EFRAG work plans be modified regarding sectoral standards, for example? These are highly important issues that must be clarified as soon as possible.
• It would be a missed opportunity to not consult companies that have been applying the sustainable finance regulatory framework for several years now - companies that have clearly identified the pain points, inconsistencies and duplications in the framework. This input would be important so that the Omnibus initiative can fulfill its goal of simplification, in what would be a comprehensive review of this framework beyond the reporting area. In this regard, sessions such as those organized by the European Commission in early February (‘reality checks’) to gather recommendations from the different stakeholders are welcome.
• It is not only what is done that matters, but how it is done. The Omnibus proposal should provide uniformity when implemented and prevent fragmentation among member states.

Finally, the legislative process in Europe follows its own timeline, and it is not short. The proposal will only be effective if it is implemented quickly, minimizing the potential uncertainty in the market. Let’s not miss this opportunity of the Omnibus initiative, and let’s work to build a framework that contributes to European competitiveness, advancing the transition to a sustainable economy in an effective and efficient manner.