ECB's Lagarde Warns CSRD Cuts Would Impair Climate Risk Management Capacity

European Central Bank President Christine Lagarde has written to EU lawmakers warning that proposed reductions to CSRD sustainability reporting scope would limit the ECB's ability to assess climate-related financial risks on its balance sheet. The letter comes as lawmakers debate the European Commission's Omnibus package, which would cut the number of companies covered by the CSRD by an estimated 80%.

The Omnibus I package proposes raising the CSRD reporting threshold from companies with 250 employees to those with 1,000 or more, removing an estimated 80% of companies from sustainability reporting requirements. Parliament rapporteur Jörg Warborn has proposed an even higher threshold of 3,000 employees and €450 million in revenue, which would reduce scope further. Lagarde noted the ECB has incorporated climate change into its monetary policy framework since 2022, including considering climate risks in collateral haircuts and, from 2026, a new climate factor in the Eurosystem's collateral framework.

Lagarde warned that the CSRD scope reduction would limit the availability of firm-level data needed for granular assessment of climate-related financial risks on the ECB's balance sheet and within its collateral framework. She also flagged that delays and other changes to the CSRD and CSDDD would reduce the ECB's capacity to implement climate-related measures effectively. The letter is significant as it represents a rare intervention by a central bank on a regulatory reform that is primarily framed as a burden-reduction initiative for businesses.

Lagarde called on lawmakers to strike the right balance between retaining the benefits of sustainability reporting for the European economy and financial system while ensuring proportionate requirements. The intervention aligns the ECB with other voices — including from financial supervisors and long-term investors — pushing back on the scale of Omnibus cuts. For Asian and Indian companies with EU trade or financial market links, the debate has direct implications for the sustainability data they will need to provide to European business partners.

Key figure — Omnibus package would remove approximately 80% of companies from CSRD requirements