Stockholm (NordSIP) – As the EU continues to seek ways to simplify its regulatory burden in the hope of fulfilling the promise of last year’s Draghi report on competitiveness, sustainability continues to be under the microscope.
In this context, national Financial Services Authorities (FSAs) have a crucial role to play. Sweden’s Finansinspektionen (FI), recently discussed the postponement of sustainable reporting requirements under the EU’s Corporate Sustainability Reporting Directive (CSRD) and its fear that it could be left under-resourced as a result. Similarly, Denmark’s Finanstilsynet, issued a press release regarding the EBA’s proposal that credit institutions’ ESG reporting requirements be simplified. On the other hand, Finland’s FSA, Finanssivalvonta, argues that banks and investment firms offering investment advice or asset management can improve their compliance with sustainability requirements.
FI Worries Delayed CSRD May Leave it Under-Resourced
Sweden’s FI commented on the postponement of the requirement to report on sustainability under the CSRD for certain companies to give the Commission and the Member States time to reach an agreement in ongoing discussions on regulatory simplification. FI notes that it supports this postponement, in line with its generally positive attitude towards regulatory simplification and reducing the administrative burden on companies.
However, FI also took the opportunity to note what it perceives as inaccuracies in the government’s position and propose clarifications regarding which companies’ sustainability reports FI has supervisory responsibility for, and the impact on the authority’s workload due to the proposed changes.
According to Sweden’s FSA, “the impact assessment states that FI has ultimate responsibility for the supervision of sustainability reports and that the Board (the Swedish Accounting Supervision Board) has been delegated ongoing supervision. FI believes that it should be clarified that FI has ultimate responsibility for the supervision of listed as well as financial companies’ sustainability reports, of which the Board has been delegated ongoing supervision of the listed companies’ reports.” (Translated from Swedish) This clarification is important since FI seems to perceive that it leads the impact assessment to recommend fewer resources be allocated to FI.
According to FI’s note, “the amending directive therefore affects both the accounting supervision of listed companies’ sustainability reports and the supervision of financial companies’ sustainability reports. The impact assessment also states that for FI and the committee, the proposal will, for a certain period, entail a smaller need for resources than would otherwise have been required, as fewer companies will be subject to accounting supervision. FI does not fully share this view.” (Translated from Swedish) FI disagrees with this conclusion.
FI notes that traditional arrangements and voluntary disclosures will still significantly affect its work load. “According to the proposal, fewer companies will, for a certain period, be subject to the requirement to report on sustainability under the CSRD than would otherwise have been the case. However, existing transitional provisions in the annual accounts laws indicate that a company that was required to prepare a sustainability report before the introduction of the CSRD must apply the provisions on sustainability reporting in the older wording. Since a large proportion of the companies affected by the current legislative changes are already required to prepare a sustainability report under the NFRD, the number of companies subject to FI’s supervision will not be significantly reduced by the proposal. Furthermore, the rules allow for voluntary sustainability reporting under the CSRD. Voluntary reports included in the annual report are also subject to FI’s supervision, which affects the workload of both FI and the committee. FI believes that it is important that this is taken into account in order to provide a fair picture of the implications of the proposal.” (Translated from Swedish)
This rather technical note highlights the challenges of simplifying regulatory requirements. Simply willing it, will not make it so.
Finanstilsynet Highlights Proposed Relaxation of Banking Disclosures
In Denmark, Finanstilsynet informed that the European Banking Authority (EBA) published proposed changes to the information that large credit institutions must disclose about ESG risks until the end of 2026, as part of the implementation of the proposed Omnibus reforms. On 22 May 2025, the European Banking Authority (EBA) published a consultation paper proposing changes to the disclosure requirements (Pillar III) for financial institutions subject to the obligations to disclose information on ESG risks under Article 449a of the Capital Requirements Regulation (CRR2).
The consultation paper aims to simplify the disclosure requirements and ensure a harmonised approach across sustainability reporting. The changes mean that the covered (large) financial institutions will no longer have to complete a number of Pillar III forms related to, among other things, the Green Asset Ratio (GAR). These proposals would apply from the second quarter of 2025 and at least until the fourth quarter of 2026 .
These amendments, while they would indeed lighten the regulatory burden on financial institutions, would also leave investors and the public with a much poorer understanding of conditions on the ground, at least temporarily.
Finanssivalvonta Worries Sustainable Preferences Are Being Neglected
One of the recently increased sustainability burdens imposed on the financial industry by EU regulators is the requirement for investment advisors or asset managers to determine and consider their clients’ sustainability preferences as part of their suitability assessment for clients. However, Finland’s Finanssivalvonta recently expressed concerns regarding the clarity of financial institutions’s instructions and processes for obtaining and recording the information necessary for the client’s suitability assessment.
The concerns arose from an assessment of investment service providers compliance with regulatory sustainability requirements, which was motivated by a supervisory project carried out by the European Securities and Markets Authority (ESMA) together with national supervisors in during 2024 and 2025. The assessment did not consider the suitability assessment obligations in their entirety, but focused on the new part of the suitability assessment regarding sustainability requirements.
“Companies must in particular improve the recording of the justifications for the suitability assessment and sustainability preferences to ensure that the client is recommended suitable investment services and financial instruments that also take into account the client’s sustainability preferences. In addition, companies must have appropriate product governance arrangements in place to ensure that the products offered are also compatible with the sustainability goals of the client target group,” Finanssivalvonta warns. (Translated from Finnish)
Even as the EU seeks to simplify legislation, Finland’s FSA’s concern with compliance with existing rules highlights the gap between the letter of the law and its complex application in the real world.
