European Central Bank (ECB) president Christine Lagarde has cautioned lawmakers that proposed cuts to the EU’s sustainability reporting and due diligence rules could undermine the bank’s ability to manage climate risks in the financial system.
According to ESG Today, her warning came in a letter to European Parliament lawmakers as they prepare to debate the European Commission’s Omnibus I package.
The proposals aim to reduce the regulatory burden on companies by scaling back requirements in several key regulations, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM).
The most notable change would dramatically raise the threshold for CSRD compliance, restricting it to companies with more than 1,000 employees, up from the current 250. This would remove around 80% of firms from the reporting rules and reduce obligations for those remaining. Further changes would see CSDDD rules narrowed to only direct business partners, with less frequent monitoring requirements. Some lawmakers, including Omnibus rapporteur Jörgen Warborn, have called for even stricter thresholds, suggesting limits of 3,000 employees and €450m in revenue.
Lagarde’s letter highlighted the ECB’s efforts to integrate climate risk into its monetary policy framework. Since 2022, climate considerations have influenced collateral haircuts, with national central banks factoring in climate risk when assessing creditworthiness since 2024. From 2026, the ECB plans to introduce a “climate factor” into its collateral framework to protect against climate-related value declines.
However, Lagarde warned the planned CSRD and CSDDD changes would significantly reduce the availability of high-quality climate data. She wrote that this could “weaken the Eurosystem’s ability to perform a granular assessment of climate-related financial risks on its balance sheet and within its collateral framework.”
Christine Lagarde said, “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.”
Keep up with all the latest FinTech news here
Copyright © 2025 FinTech Global
