European Central Bank (ECB) President Christine Lagarde has issued a strong warning to EU lawmakers over plans to weaken corporate sustainability reporting rules, arguing that such changes would undermine the bloc’s ability to assess and respond to climate-related financial risks.
The warning comes as the European Parliament considers amendments to the Corporate Sustainability Reporting Directive (CSRD) under the Omnibus proposal, which could dramatically scale back the number of companies required to report sustainability data. Some estimates suggest up to 80% of companies could be removed from mandatory reporting obligations if the reforms proceed.
In a letter to Members of the European Parliament, Lagarde stressed that firm-level sustainability disclosures are essential to the Eurosystem’s ability to monitor climate risks across the financial system. She cautioned that reducing the scope of reporting would erode transparency and weaken central banks’ capacity to protect financial stability.
“The proposed reduction in the scope of undertakings subject to sustainability reporting requirements under the CSRD would limit the availability of firm-level data, thereby weakening the Eurosystem’s ability to perform a granular assessment of climate-related financial risks on its balance sheet and within its collateral framework,” 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.”
Lagarde also highlighted the ECB’s ongoing efforts to integrate climate considerations into its monetary policy framework. These include revising collateral policies to reflect environmental risks and the planned introduction of a “climate factor” by 2026 to guide investment and lending decisions. However, she warned that a rollback of CSRD obligations could significantly impair these initiatives.
The intervention reflects growing concern among regulators that weakening sustainability rules risks leaving investors, central banks, and financial institutions in the dark about how exposed companies are to climate change. Without reliable and comparable data, it becomes harder to measure risks such as stranded assets, energy transition costs, and climate-related litigation.
The debate over CSRD reform highlights a wider political tension between ensuring that sustainability reporting remains robust enough to drive accountability while also responding to concerns from smaller businesses about compliance costs. Lagarde’s intervention signals that, from the ECB’s perspective, the cost of diluting the framework may ultimately outweigh the benefits.
