With the Omnibus package, the European Commission has presented proposals for simpler and more efficient sustainability reporting and due diligence obligations. That’s good news! We welcome this initiative, which also impacts the financial sector. Regulation needs to be effective and efficient. This also applies to the EU regulatory framework on sustainability. The Omnibus package recognises that small companies should not be treated like large corporations.

An important element of the Omnibus is the reduction in the scope of the Corporate Sustainability Reporting Directive (CSRD) and the Taxonomy Regulation (TR). In addition, companies that remain subject to these regulations will not have to report as many data points.

These adjustments are a step in the right direction. However, we at BaFin see a need for further clarification and greater consistency.

Establishing harmony with supervisory law

EU legislators should take the opportunity to ensure greater consistency between the various sustainability frameworks. The planned reduction in the scope of the CSRD and the number of data points for reporting should also be reflected in the supervisory disclosure requirements for financial institutions in the relevant Level 1 legislation, such as the Capital Requirements Regulation (CRR). Without these adjustments, the reduction in the burden on companies in the real economy will be limited. Banks and investors will request the relevant data from companies by default, as they need it to meet their own disclosure obligations.

In addition, if application of the CSRD is postponed as proposed by the European Commission, the dates of application of the CRR and CSRD will diverge. This may pose problems for credit institutions, for example, as they are required to publish environmental, social and governance (ESG) data by the reporting date of 31 December 2025 in accordance with Article 449a of CRR 3. In this regard, they are at least partially dependent on ESG data from their counterparties. To solve this problem, we would support the publication of a No Action letter or a similar clarification by the European Banking Authority (EBA). The EBA can use such a letter to recommend that national competent authorities refrain from taking any measures to enforce a regulation for the time being.

Ensuring more consistency between transition plans and ESG risk plans

Furthermore, the requirements for transition plans, such as those in the CSRD and the Corporate Sustainability Due Diligence Directive (CSDDD), should be consistent with the requirements for the ESG risk plans that supervised companies are required to prepare under the Capital Requirements Directive VI (CRD VI) or the Solvency II Directive.

For the sake of efficiency, we recommend allowing companies to use information from the ESG risk plans in transition plans under the CSRD and the CSDDD, as well. Transition plans under the CSRD and the CSDDD must also demonstrate credible and verifiable transition pathways. This is particularly important in light of the announced revision of the Sustainable Finance Disclosure Regulation (SFDR) and the possible introduction of a “transition product” category.

Supervised companies must also use alternative data in risk management

If lawmakers adopt the Commission’s proposals, supervised companies in the financial sector will in future have to work with a smaller range of standardised disclosures from other companies than originally planned. This does not make it impossible to manage credit, market or insurance risks appropriately, but companies will have to adapt. For example, they need to be more willing to work with publicly available information or data from third-party providers.

On the other hand, there should not be any general restriction on the ability of supervised companies to collect specific data from their counterparties or contractual partners. However, they should only do so if specific information is necessary for appropriate risk management. In any case, it will not be acceptable to use purported supervisory requirements for comprehensive, standardised data collection as an excuse to demand all kinds of data from small and medium-sized business customers. BaFin does not have any such expectations.

Consumer protection: high level of transparency is a must

The Commission’s plans for the Omnibus are also relevant from a consumer protection perspective. Take investment products, for example. Providers who advertise their products as sustainable within the meaning of the SFDR have committed to investing minimum quotas for some of these products in economic activities that are defined as environmentally sustainable under the Taxonomy Regulation. However, if fewer companies are required to disclose data under the Taxonomy Regulation and this data is not available through other channels, these providers may no longer be able to fulfil their minimum quota or demonstrate that they have done so. They might have to adapt their products.

It is good news that the European Commission is striving to achieve more efficient sustainability regulation. The Omnibus package contains many useful proposals. The task now is to strike the right balance between the specific measures and, above all, to ensure greater consistency between the various sustainability regulations.

This article was first published on 31 July 2025 on Tagesspiegel Background.