Omnibus Reforms Could Hinder ECB Climate Assessments

NordSIP (Stockholm) – The Omnibus reforms of the European Commission have come under fire from several quarters, including from Amnesty International, WWF, faith-based organisations, the PRI and even the EU Ombudswoman, Teresa Anjinho. Echoing an earlier opinion of the ECB on the matter, the central bank’s president, Christine Lagarde, personally joined the choir of Omnibus sceptics in a letter to Members of the European Parliament on August 15th.

In the letter, Lagarde highlighted the critical role of climate-related disclosures in ensuring financial stability and effective monetary policy implementation. While outlining broader efforts to integrate climate risks into the ECB’s collateral framework, she placed particular emphasis on the availability and quality of corporate climate data as a decisive factor for success. Changes to the scope of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) were at the heart of the matter.

Lagarde reiterated that climate change directly influences the ECB’s primary mandate of price stability, as it reshapes economic structures and financial markets. To address this, the Eurosystem has begun integrating climate risk into its operations, from credit assessments and collateral haircuts to the acceptance of sustainability-linked bonds. However, she stressed that these measures can only be as robust as the data underpinning them.

“To adequately consider the implications of climate change and nature degradation, the Eurosystem requires sufficient high-quality climate data,” Lagarde emphasised. “In this respect, the ongoing legislative process to amend certain corporate sustainability reporting and due diligence requirements (the “Omnibus proposal”) has significant implications for the Eurosystem,” Lagarde added, noting the relevance of CSRD and CSDDD for the ECB’s climate-related assessments.

A narrower reporting scope, or delays in the transposition of the CSRD into national law, could significantly undermine the ECB’s ability to perform risk-sensitive operations. For instance, without consistent firm-level greenhouse gas emissions data or transition plans, the plans for the inclusion of a “climate factor” adjustment to reduce collateral value for issuers with higher climate risks, would be undermined.

“Moreover, the amendments to the CSRD and CSDDD could hinder the Eurosystem’s ability to implement measures, as could delays in the transposition of the CSRD into the national laws of euro area Member States. It is therefore important that these amendments strike the right balance between retaining the benefits of sustainability reporting for the European economy and the financial system while also ensuring that the requirements are proportionate,” Lagarde concluded.

NordSIP (Stockholm) – The Omnibus reforms of the European Commission have come under fire from several quarters, including from Amnesty International, WWF, faith-based organisations, the PRI and even the EU Ombudswoman, Teresa Anjinho. Echoing an earlier opinion of the ECB on the matter, the central bank’s president, Christine Lagarde, personally joined the choir of Omnibus sceptics in a letter to Members of the European Parliament on August 15th.

In the letter, Lagarde highlighted the critical role of climate-related disclosures in ensuring financial stability and effective monetary policy implementation. While outlining broader efforts to integrate climate risks into the ECB’s collateral framework, she placed particular emphasis on the availability and quality of corporate climate data as a decisive factor for success. Changes to the scope of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) were at the heart of the matter.

Lagarde reiterated that climate change directly influences the ECB’s primary mandate of price stability, as it reshapes economic structures and financial markets. To address this, the Eurosystem has begun integrating climate risk into its operations, from credit assessments and collateral haircuts to the acceptance of sustainability-linked bonds. However, she stressed that these measures can only be as robust as the data underpinning them.

“To adequately consider the implications of climate change and nature degradation, the Eurosystem requires sufficient high-quality climate data,” Lagarde emphasised. “In this respect, the ongoing legislative process to amend certain corporate sustainability reporting and due diligence requirements (the “Omnibus proposal”) has significant implications for the Eurosystem,” Lagarde added, noting the relevance of CSRD and CSDDD for the ECB’s climate-related assessments.

A narrower reporting scope, or delays in the transposition of the CSRD into national law, could significantly undermine the ECB’s ability to perform risk-sensitive operations. For instance, without consistent firm-level greenhouse gas emissions data or transition plans, the plans for the inclusion of a “climate factor” adjustment to reduce collateral value for issuers with higher climate risks, would be undermined.

“Moreover, the amendments to the CSRD and CSDDD could hinder the Eurosystem’s ability to implement measures, as could delays in the transposition of the CSRD into the national laws of euro area Member States. It is therefore important that these amendments strike the right balance between retaining the benefits of sustainability reporting for the European economy and the financial system while also ensuring that the requirements are proportionate,” Lagarde concluded.