EU Scales Back Sustainability Disclosure Rules, Widening Opportunity for Fintech

The EU’s late 2025 deal with lawmakers is intended to simplify and sharply reduce corporate sustainability reporting obligations, freeing over 80 percent of companies from the current green deal disclosure rules, as the bloc tackles slow economic growth and rising geopolitical pressure.  

“This is an important step towards our common goal to create a more favourable business environment to help our companies grow and innovate,” said Marie Bjerre, Denmark’s minister for European Affairs, was cited as saying when the deal was announced. Denmark took a lead during the talks, representing EU governments.  

EPP’s Jörgen Warborn agreed that the deal was good for business in Europe. “This agreement brings historic cost reduction,” Warborn said. “I hope this omnibus has its final destination next week in Strasbourg where we will vote this in plenary.”

However, critics—including investors and NGOs—warn that the rollback will make low-carbon leaders harder to identify, potentially reducing incentives for organizations to adopt greener policies.  

Mandatory disclosures will now shrink to a smaller set comprising the largest organizations: For CSRD (Corporate Sustainability Reporting Directive), the threshold has been set to firms with over 1,000 employees and a turnover of €450 million, while the threshold for CS3D (Corporate Sustainability Due Diligence Directive) compliance has been set to 5,000 or more employees and €1.5 billion annual turnover. Moreover, compliance has been pushed to 2029, while climate transition-plan obligations have been removed entirely.

Supporters of the updated rules push the changes as reducing red tape to boost competitiveness at a time when other major economies—namely the US—are rolling back climate-friendly policies in favor of faster economic growth. The EU is also simplifying its foundational sustainability policies, including by reducing ESRS (European Sustainability Reporting Standards) datapoints by 61 percent and revamping the SFDR (Sustainable Finance Disclosure Regulation) rules for simpler and more comparable disclosures.

To be clear, none of this means that the EU’s focus on mitigating the effects of climate change are to be swept under the carpet. Rather, the rules are changing rather than vanishing, the idea being to establish an optimal compromise between sustainability, innovation, and economic growth. In fact, there is still every chance that demand for compliance tooling will rise in the longer term, especially among large banks, issuers, and asset managers, given that they must now re-map their timelines and rebuild their reporting roadmaps.

At the same time, data scarcity could spur innovation for fintech and regtech vendors. With far fewer mid-sized firms now required to publish standardized ESG data, investors and lenders will need to rely more on their own research, including alternative sustainability signals. This could include transaction-level insights, supply chain analytics, geospatial risk data, and AI-driven assurance models, to name a few examples. This "detective work" creates a commercial space for fintechs that can help clients address sustainability data scarcity. As such, the EU’s retreat from universal disclosure may actually end up amplifying the role of technology in keeping vital sustainability information flowing through the bloc’s financial ecosystem.