Amid the recent flood of news about sustainability reporting, one crucial perspective has been largely overlooked: that of investors. The EU’s proposed Omnibus package includes a wide range of legislative proposals, primarily targeting the Corporate Sustainability Reporting Directive (CSRD), which came into effect in recent years, and the Corporate Sustainability Due Diligence Directive (CS3D), adopted just last year.In short, CSRD requires certain companies to report standardized, audited sustainability data as part of their financial disclosures. CS3D, in turn, mandates companies to manage the adverse environmental and social impacts of their operations and supply chains. Now, significant reductions in the scope of both regulatory frameworks are being proposed.
Public debate has largely focused on the administrative burden of reporting, overshadowing the deeper purpose of these regulations. The goal of sustainability reporting is to enhance market transparency by shedding light on the true impacts and costs of a company’s activities. This allows market mechanisms to appropriately price in the risks and opportunities associated with a company’s future prospects. Before CSRD came into effect, investors and other stakeholders had no reliable way to assess even basic sustainability metrics such as a company’s carbon footprint or carbon intensity. However, these externalities can significantly affect a company’s valuation, especially as sustainability risks materialize. Moreover, for investors, it is highly relevant to know whether Company A can produce the same product with half the carbon footprint of Company B—this can be a key competitive advantage.
An investor’s core responsibility is to evaluate the risk-return profile of an investment. Sustainability data plays an increasingly important role in this assessment. In fact, all financial market disclosure regulations ultimately serve the same fundamental purpose: reducing information asymmetry and improving market efficiency. Without reliable sustainability data, companies’ negative externalities remain unaccounted for in risk-return analyses. This weakens market efficiency and leads to mispricing of sustainability risks.
It is also worth noting that while corporate sustainability reporting requirements face potential rollbacks, investor disclosure obligations under the Sustainable Finance Disclosure Regulation (SFDR) remain unchanged—or are even increasing. In Finland the Financial Supervisory Authority has required detailed and extensive reporting on funds’ sustainability characteristics. Investors will still need to report on sustainability factors, meaning they must continue sourcing data directly from companies or purchasing it from third parties. This situation is reminiscent of the challenges faced in 2021 when SFDR was introduced. At that time, policymakers sought to leverage financial institutions as gatekeepers to accelerate the sustainable transition, but corporate disclosure obligations had not yet been fully established. As a result, financial institutions faced significant costs and administrative burdens—a scenario that could repeat itself if the Omnibus proposal moves forward in the EU legislative process.
A substantial amount of time, money, and resources has already been invested in preparing for and implementing sustainability reporting requirements. This places early adopters at a disadvantage—companies that have already made significant investments may now lose the ability to demonstrate their sustainability performance relative to peers. Companies had every reason to expect that once adopted, regulations would remain in place long enough for their impact to be properly assessed. The current regulatory back-and-forth creates uncertainty, undermining companies’ willingness to invest—at a time when geopolitical instability is already challenging business growth. The same logic applies to Finland’s climate targets. Many frontrunners have already committed to ambitious climate programs, trusting that policy decisions will remain consistent. Now is the time to stay the course and continue building on these foundations—the long-term benefits will be worth it.
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Additional information:
Suvi Collin
Head of Legal & ESG
+358 50 560 3532
suvi.collin@fvca.fi
