Europe’s number one priority is to improve its competitiveness and increase economic growth. Without higher growth, all the challenges the EU faces – the need to transition to a green economy, supporting an ageing population, the need to spend more on defence – become that much harder. 

Banks are part of the solution. We are enablers – powering growth and supporting investment. That’s the case generally, but especially as regards the green transition.  

The approach to the transition must be aligned with policies and regulatory frameworks that support growth. The Clean Industrial Act and the adjustment of requirements for the auto sector are good examples of policy approaches that do this. And the simplification of the sustainability framework, the so-called Omnibus, is a welcome acknowledgement that we need to eliminate excessive requirements and complexities which place a great burden on companies – of all sizes. 

The recent Omnibus proposal addresses a number of concerns – but more work is needed. Three points that still require action to be taken: 

1. The changes to Corporate Sustainability Due Diligence Directive (CSDDD) provisions on transition plans (TP) still do not reflect the fact that any TP obligation cannot go beyond the underlying science, market practice and applicable regulations in every jurisdiction on which companies operate.  Alignment with 1.5º depends on external factors such as the IEA STEPS (Stated Policies Scenario) and APS (Announced Policy Scenario). Any corporate, financial or non-financial, with presence in different jurisdictions need legal flexi-bility, for example to carve out of the plan subsidiaries where the relevant local rules or market practices are evolving differently. We agree with EU member states who have called for an indefinite postponement of this directive until this fundamental point has been addressed.
   
   
2. Reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) need to be stream-lined. Sustainability reporting requires time to mature. Both CSRD and ESRS are too ambitious, imposing requirements that companies cannot fulfill today. Instead of an all-encompassing approach, reporting re-quirements should be targeted focusing on climate (E1), own workforce (S1) and business conduct (G1). This approach would reflect companies’ abilities to address these key issues, where effective action can have a meaningful impact.  Furthermore, banks should not be required to collect data from companies that are not obliged to disclose data under CSRD. Otherwise, the so-called “trickle down effect” on smaller companies will not be addressed.
   
   
3. Taxonomy and Green Asset Ratio. The current taxonomy is too complex to be useful tool, and the cur-rent proposal does not address the need for a fundamental simplification. While there is a good inten-tion to reduce the number of KPIs by introducing materiality thresholds, the process that banks will have to follow to assess whether they can apply the threshold or not is very complex (from initial analy-sis of the proposal). We should be striving for pragmatic solutions that meaningfully remove the bur-den on companies: companies should be able to use the taxonomy on a voluntary basis if it helps them to portray their green activity. Furthermore, the Green Asset Ratio does not provide meaningful infor-mation to the market, it requires extensive explanation from the banks on what the metrics mean. Giv-en the limited value, it should be removed. If it is not, an immediate suspension of the reporting re-quirement is needed (including upcoming GAR in Pillar 3 this summer) until the whole review process of the Taxonomy KPIs, templates and DNSH criteria has been completed and changes adopted. It is in-efficient to work on a metric that is under review and subject to changes over the next years. 

By taking a pragmatic approach, we have the opportunity to shift Europe's focus from regulation and reporting to supporting the transition, so that going green is truly a source of growth and competitiveness for Europe.