ECB President Christine Lagarde has expressed concerns that recent legislative efforts to reduce sustainability reporting obligations in Europe could impair the ECB's ability to incorporate climate risks into its monetary policy and financial stability measures.

Lagarde warns that reducing reporting requirements might hinder the ECB's capacity to manage climate risks effectively, as the ECB has been increasingly integrating climate factors into its assessments.

Proposed legislative changes, such as the European Commission's Omnibus I package, aim to significantly cut back on sustainability reporting, including raising the employee threshold for companies covered by the CSRD from 250 to 1,000, which could exclude about 80% of companies from reporting obligations.

Some lawmakers are advocating for even stricter cuts, proposing thresholds of 3,000 employees and €450 million in revenue for CSRD and CSDDD coverage, further narrowing the scope of reporting requirements.

There are ongoing debates in the European Parliament, with some members supporting proposals that limit sustainability reporting obligations to only the largest companies, such as those with over 3,000 employees and €450 million in revenue.

Lagarde emphasizes the importance of a balanced approach, advocating for maintaining the benefits of sustainability reporting while ensuring that requirements are proportionate to their purpose.

She highlights that the ECB relies heavily on high-quality climate data to evaluate risks, and reducing the scope of the CSRD would limit access to detailed, firm-level data crucial for assessing climate-related financial risks.

Lagarde warns that shrinking the scope of the CSRD would weaken the ECB's capacity to monitor and respond to climate risks, ultimately impairing its ability to implement effective climate-related measures.