European Commission’s Sustainable Finance Package: Rules need to be practicable, transparent and SME-friendly!

The European Commission has presented a package of several long-awaited legislative acts which are intended to help make Europe’s economy greener, more sustainable and fairer.

• The amendments to the Financial Instruments Directive (MiFID II) will introduce an obligation to ask for sustainability preferences in advisory services for securities. The rules will be mandatory as of October 2022. Most Savings Banks have implemented the process since last year and already ask customers for their preferences. As of 1 May 2021, whenever they give advice all Savings Banks will, in a technically supported process, ask whether their customers are interested in sustainable securities. The DSGV therefore welcomes the EU Commission’s proposals.
  
  
• The legislative proposal on sustainability reporting (Corporate Sustainability Reporting Directive - CSRD) adds precision and further substance to the existing reporting obligations under the Non-Financial Reporting Directive (NFRD). The EU Commission wants to increase the quality and comparability of sustainability reports. With the EU Commission’s legislative proposal on the Corporate Sustainability Reporting Directive, the number of Savings Banks that will be obliged to submit reports will increase significantly.
  
  “When expanding the group of institutions that are obliged to submit sustainability reports, the concept of proportionality should be kept in mind. The legislative proposal will entail considerable extra effort for Savings Banks, not least because the implementation deadlines are short and the periods planned by the Commission between the publication of the standards and their first-time application are also very short. Overall, a reasonable balance should be ensured between the desired transparency and the regulatory costs for Savings Banks”, said DSGV President Helmut Schleweis.
  
  
• Finally, the package includes the long-expected Delegated Act, which provides further detail on the EU taxonomy’s environmental objectives of “climate protection” and “adapting to climate change”. The taxonomy is likely to become more complex in the next few months because the other four environmental objectives are to be fleshed out by the end of this year. Meanwhile, social sustainability and its measurement are also coming into focus, and rightly so. In this context, Savings Banks are in favour of adopting a broadly-based approach and taking into account business models motivated by social sustainability within the framework of a social taxonomy. “There must not be any definitions of social sustainability and no measurement systems of social taxonomy that do not take into account their most important players. We hope that the taxonomy and the technical criteria will be practicable, transparent and SME-friendly. They must be aimed at providing incentives for improvements instead of creating red tape, which would mean that sustainable behaviour is then perceived as a nuisance. However, the Commission’s proposal published today is very complex and does not meet these requirements”, said DSGV President Helmut Schleweis.