Europe regrets being a “regulatory hell” and collects cable with its demands on the ESG Front

The European Union is about to take a great step back in its main project in recent years. European institutions have wanted the old continent to lead the transition to a world dominated by the ESG (environmental, social and governance) criteria, but, in the last quarter, given the criticisms they have received for the negative impact of their proposals on The European economy itself and, above all, before an American government that will take the opposite steps, it seems that the European Commission has decided to take an important turn to its future plan. According to the agency Bloombergthat would have had access to commission documents, this Wednesday a key withdrawal of the demands that were prepared on the ESG Front will be formalized: The new sustainability centered directives will soften a lot, with a final proposal that will leave out 85% of companies that, in principle, were going to be subject to new demands.

When French government spokeswoman Sophie Primas, she declared in the end of January that Europe was becoming “a regulatory hell” for companies, it was clear that a turn was confirmed in the European sustainability strategy. France has always been one of the main engines in this effort and, if one of ESG’s hearts in Europe stopped supporting the Brussels plan, it seemed inevitable for the commission to end up collecting cable with the proposals that had been put on the table .

Now, from Bloomberg They confirm that, definitely, it will be like this: the agency publishes how on Wednesday the commission will officially propose that the ESG regulations are substantially moderate, after having access to the document that collects the proposals of the agency.

According to the agency, the two main directives of the Commission will be reviewed in the front of the ESG regulation, known as CSDDD and CSRD. The first focuses on the proceedings that companies that have activity in Europe on corporate sustainability must open, while the second focuses on the dissemination of the impact of its business on matters such as the environment worldwide.

The Commission would have decided that the sanctions are reduced, and the obligation to monitor the ESG risks that its suppliers suppose, and the entire supply chain of a company that has its activity in Europe. In addition, the proposal will be withdrawn that companies are subject to legal consequences if the norms centered on environmental or social aspects are violated.

There are some concrete proposals that have been on the table, for example, reduce communication demands for companies that import steel and cement from countries that have more lax regulation in this front and, the most important of all: drastically reduce the Number of companies that are going to be forced to meet the demands of the CSDDD and CSRD. In this sense, It will be communicated that only companies with more than 1,000 employees, and exceed 450 million euros in annual benefits, will be completely subject to this regulation.

In this last point is the key to the change that the commission has given: it will eliminate the demands of 85% of the companies that initially expected to have to comply with the regulation, and thus fits the approaches that had presented the two largest European economies , France and Germany.

Another change that would be ready to be proposed is the delay of one year in the entry into force of the regulation that requires informing the climate impact of the economic activity of a company, a part of the directive that, in recent years, has Raised many ampoules in different corporate sectors of the old continent, for example, in cocoa or coffee -based food producers, who have found serious problems adapting to the directive that the commission had prepared European

The role of USA in the Europe

The arrival of the new US government has been able to have an impact on the European Commission’s decision to reduce its demands on business activity in the Old Continent, and would have done it by two ways: the first, directly press American companies are not subject to a regulation that they consider excessive. In January, Howard Lutnick, Secretary of Comerio in the country, confirmed in the American Senate that the new administration was considering displaying “commercial weapons” to ensure that US companies with activity in the euro zone did not have to meet the CSDDD.

In addition, on the other hand, the deregulatory process that the Trump government is carrying American companies if new directives were not retouched.

The flight of investors into ESG funds

The decision that the European Commission seems to have also had to do with an increase in disinterest by markets in ESG issues. Before the arrival of the pandemic, the financial markets were overturned at the start of this new trend, and although it is true that there are still efforts to maintain these criteria afloat, and continue giving them importance, the attraction they seemed to have then for many investors He is giving signs of weakness.

The reimbursements that are taking place in the ESG investment funds are good proof of this. As Morningstar explained at the end of January, The funds that complied with the strictest Esg standards of the European Union had suffered investment outings at a record rate in the last quarter of last year. In addition, they also emphasized the fact that a non -viewed amount until that moment of investment funds had decided Investment trend.

Moreover, according to the latest survey of the Inverco Observatory, only 7% of the surveyed managers expect to launch new products with the maximum classification of sustainability, the famous funds “Article 9”.

These milestones are really significant for the investment industry in Europe, where 80% of ESG assets in investment funds around the world accumulates, and may have had something to do with the decision that the European Commission seems to have adopted .