I have been participating in the work of the CWG SSC (Consultative Working Group at the Sustainability Standing Committee) for over a year. As part of this work, representatives of all capital market supervisory authorities in the European Union obtain information directly from representatives of various stakeholders: companies, investment firms, rating agencies, and organizations that protect investors' rights. Each topic discussed ends with a discussion.
One of the main points of the meeting on November 12, 2025, was to discuss ESMA's work plan for 2026-2028. The regulatory framework for sustainable investments is almost complete (the last element, the ESG ratings regulation, will come into full effect next year), but some parts of it will be subject to change. In just a few days, we will officially learn about the Commission's plan to revise the SFDR. The market's reaction to leaks about what changes we should expect has been moderately positive. The key elements of the regulation will be retained, and above all, the issue of fund typology and nomenclature will be clarified.
When working on the draft amendments to the SFDR, the Commission drew on ESMA's achievements in the area of guidelines on fund naming. Their introduction streamlines communication, reduces the likelihood of greenwashing, and, contrary to many people's fears, has not led to an outflow of funds. Interestingly, investors are more loyal to sustainable funds because even in worse times they are not as eager to withdraw their funds from them as they are from traditional investment products.
One of the more serious topics we discussed was the issue of investing in the defense sector as part of sustainable investment. Current regulations do not automatically exclude the defense sector from sustainable investments, with the exception of financing controversial types of weapons. However, investing in companies that manufacture weapons exposes investors to a number of risks related to human rights, ethics, corruption, cybersecurity, and the misuse of products. However, it is worth considering whether defense should be included in the domain of sustainable development. Does everything we develop and invest in have to be sustainable? Doesn't this lead to a devaluation of the meaning of sustainability?
The most hotly debated topic was the issue of reducing the amount of data on sustainable development that will be fed into the sustainable investments system by approximately 95% after the changes resulting from the Omnibus come into force. I got the impression that not everyone present at the meeting was aware of the effects of deregulation in this area. When the original data from companies is no longer available, on what basis will data providers estimate the data that will later form the basis for investment decisions by funds?
The conclusion of the discussion was clear: the future of sustainable investment in Europe depends on the extent to which funds, other financial institutions, and regulators can convince companies that it is worthwhile to report voluntarily and to do so reliably. If this does not happen, in two to three years' time, funds, lacking credible investment targets in Europe, will primarily support the development of companies in those countries that are developing their sustainable development reporting systems.
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