The EU’s sustainable omnibus proposal has made one thing clear: There’s a disconnect in Brussels between what investors and businesses want when it comes to climate-related disclosures and what politicians think they want.
Even the largest party in the EU parliament (EPP) can’t seem to agree on the best way to proceed. Recent amendments proposed by EPP members show the group is divided, with some wanting to go even further than the original omnibus proposal and others concerned that it goes too far.
This has created a lot of uncertainty over negotiations that are set to begin in mid-July. The EU commission’s pledge to cut reporting burdens by 25% by the first half of the year won’t be met. Even financial regulators, usually loath to get involved in party politics, have spoken out on the potential financial risk the omnibus could have.
When the EU’s sustainable investment rules — the EU taxonomy, corporate sustainability reporting (CSRD) and due diligence directives (CSDDD) — they were hailed as giving the EU a lead on the transition to a green economy and filling a vital data gap that investors and regulators need to ensure the EU is tackling climate change.
Like a lot of things in the EU, the rules were complicated, with companies expected to compile hundreds of data points. Meanwhile there is growing concern that the EU economy is stagnating compared to the US and China due to a lack of competition and innovation.
In 2024, economist Mario Draghi wrote a report on EU competitiveness and identified an annual investment gap of €800bn. In response, the EU commission agreed to try and slash red tape and started by tackling the EU’s sustainability directives.
The EU commission’s proposal was intended to help limit red tape and make it easier for businesses to operate.
But politics seems to have gotten in the way of good intentions. What Brussels seems to be ignoring is that by going back on its initial directives, it is giving mixed signals to investors and businesses.
Instead of going ahead with investments in ESG and renewables, the industry is stagnating. Global sustainable funds had their worst quarter on record, with net outflows of US$8.6bn in the first quarter of 2025, according to asset management firm Morningstar. While the omnibus isn’t the main cause of the outflows, as the US’s pullback from green policies has increased much uncertainty around ESG investment, it certainly hasn’t helped.
During the Sustainability Omnibus Podcast, Simon Nixon and I spoke to many investors and asset managers and they all said similar things. Namely, that while it makes sense to limit some of the data points, removing 80% of companies from the scope of the directives means that only large multinationals will be covered.
That means investors won’t be able to have access to vital emissions information for mid-capped firms and will have to continue paying for access to estimated data that is not as accurate or rely on voluntary disclosures which would not have the same weight as mandatory measures.
In other words, the omnibus will not create a competitive advantage for European investors. The limit in scope could also have further implications for other green rules, with 50% reduction of datapoints in the European Sustainability Reporting Standards expected.
What Brussels may be forgetting is that, according to many, the CSRD, CSDD and EU taxonomy is the EU’s competitive advantage. No other jurisdiction in the world has as much climate-related data. With renewables set to meet almost half of global electricity demand, investors would have had more incentive to invest in Europe’s clean sectors as they would have had access to more transparency.
But now those same investors have paused. At a time when investment in green energy is needed more than ever, Brussels seems to be ignoring what is clearly Europe’s competitive advantage and instead is pursuing an agenda that seems to be trying to incorrectly compete on terms set by the US.
Europe doesn’t need to follow the US. It can set its own agenda and return to being a leader in the green transition.
This page was last updated July 10, 2025
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
