As sustainability regulation in the EU continues to evolve, the European Commission's forthcoming Omnibus proposals aim to significantly reduce the administrative and financial burdens on investors and lenders complying with sustainability reporting and disclosure rules.
The Omnibus packages
As part of its 2025 work programme, the Commission plans to implement a series of Omnibus packages, including those focused on sustainability and investment simplification. A key goal, as outlined in the Commission's roadmap, "A Competitiveness Compass for the EU", is to cut overall baseline administrative costs for companies by 25%, which was approximately €150 billion in 2022. The initiative is informed by reports such as "The Future of European Competitiveness" by Mario Draghi, which highlights industry challenges and targets for enhancing EU competitiveness.
The LMA's key recommendations
We welcome the Loan Market Association's (LMA) position paper setting out its key recommendations on the Commission's Sustainability Omnibus. The paper acknowledges the potential to enhance EU competitiveness while alleviating the compliance burden and associated costs of sustainability reporting. However, the LMA cautions the Commission to ensure simplification measures do not inadvertently increase the complexity of existing standards and legislation, which could deter investment.
The key recommendations include:
- Resolving inconsistencies between different frameworks: Align definitions, remove areas of duplication, and identify opportunities to align the European and non-EU standards with international standards to reduce the reporting burden for multinational businesses and non-EU investors operating in the EU.
- Consulting the industry: Engage market participants when evaluating the retention of any of the existing legislation and gather new data to understand the key pain points for users and reporters of sustainability.
- Clarifying credible investments: Provide clarity on what the Commission considers to be credible investment in transition activities.
- Developing supporting policies: Create sectoral decarbonation roadmaps, provide a new labelling system and establish public-private investment structures to de-risk investments in new technologies.
- Protecting legal certainty: Ensure the Omnibus brings legal certainty to improve market confidence and investment decisions.
Looking ahead
Sustainability legislation has become increasingly complex and burdensome on the financial sector as international regulatory authorities implement diverse standards and frameworks to meet ESG targets. The Commission has an opportunity to unify regulations both within the EU and internationally, streamlining the associated compliance risks and boosting competition. However, it must ensure that the new packages do not compromise the quality of sustainability reporting and ESG standards or impose additional financial costs on businesses.
The Commission is expected to unveil the specifics of the Omnibus proposals on 26 February 2025, providing clarity on the upcoming changes and format of the packages. We also anticipate the LMA's detailed commentary on the Omnibus following its more comprehensive consultation with its members.
