Following the lead of the Association of German Banks (BdB), the Federation of German Industries (BDI) is now also calling for fundamental changes to sustainability regulation. „We need a new political approach,“ states a new policy paper from the BDI. The association argues that the ecological transformation should be shaped more by the real economy. The effectiveness of the capital steering measures remains low, but is accompanied by high costs due to the complex and extensive set of rules. regulations, the paper states. Current sustainability regulations are „a disservice to the cause“.

According to Chief Executive Tanja Gönner, the next German government must actively campaign for a fundamental adjustment of the sustainable finance framework in Brussels. „Politicians urgently need to change their approach to the ecological transformation,“ Gönner told Börsen-Zeitung. „The focus should be on economic and climate policy solutions, and not on ineffective and costly financial policy requirements.“ Companies need more public investment in infrastructure, greater risk reduction through economic policy measures, good support from the banking industry, and more venture capital.

The BDI argues in the position paper that the Corporate Sustainability Reporting Directive (CSRD) must be significantly pared down, the EU taxonomy should only be applied voluntarily, transformation plans should only be understood as „general signposts“, and the challenges of ESG ratings should be resolved.

According to Gönner, the transposition of the CSRD into national law – which was not finalised by the „traffic light“ coalition government – should take place „swiftly and practically“ after the federal elections, in order to give the economy legal certainty. In order to avoid competitive disadvantages for German companies, limitations on sanctions in the first year of application, and the inclusion of independent third parties in the review panel, are necessary, said the BDI CEO. Gönner expects the new German government to push for simplifications in Brussels.

According to the industry association, the effectiveness of steering capital flows using existing green financial instruments and regulations is often low. It is far too complex and ultimately too costly. In future, the BDI therefore expects „fewer politically forced and small-scale attempts at control via the financial markets, and more real economic, market-based solutions“ from politicians in Berlin – and especially in Brussels. The measures would have to start where the changes are actually taking place. The state could also support the transformation by investing more in infrastructure – for example in the electricity or hydrogen network.

The BDI also advises taking a closer look at the current situation for corporates. Challenges in the transformation arise above all when business models come under pressure due to politically induced price increases of important input factors, the use of new technologies that are not yet ready for the market, or high initial investments, it says.

For companies and their ecological investments, there should be a basic ability to finance them, primarily through internal financing, and supplemented by loans. According to the BDI, financing advantages for sustainable investments are currently limited.

In this context, the association also refers to the increased role of auditors as a result of sustainability regulation, and criticises the lack of uniformity – both within Germany and across European. An EU auditing standard could help counteract this problem.