EU Regulatory catch-up

A) Latest: new EU strategy

1. ‘Competitiveness Compass’ revealed

On 29 January, the European Commission (EC) unveiled their new ‘Competitiveness Compass’, to “steer their efforts” in reversing the European Union’s 20-year productivity gap (when compared to the Unites States and China).

In summary, this ‘compass’ sets out:

a) Three core EU areas: that now require action: ‘Innovation’, ‘Decarbonisation’ and ‘Security’;

b) Five ‘essential enablers’: to achieve future competitiveness across the entire EU economy:

• Simplification: reducing drastically the regulatory and administrative burden.
• Lowering Single Market barriers: via new ‘Horizontal Single Market Strategy’
• Financing competitiveness: via new ‘EU Savings and Investments Union’ to create new investment products
• Promoting skills and quality jobs: via a ‘Union of Skills’
• Better coordination of policies at EU and national level: incl. new ‘Competitiveness Coordination Tool’.

Ongoing, the EC say their new ‘compass’ will set the path for Europe “to become the place where future technologies, services and clean products are invented, manufactured and put on the market” and “the first continent to become climate neutral.”

2. EC publish 2025 Work Programme

Earlier this month, the EC officially adopted their 2025 Annual Work Programme. Essentially, this is a long list of the major EU policy and legal initiatives planned for the year ahead, based on “close cooperation” with the European Parliament, Council and expert bodies.

The latest EC work programme is driven by their new ‘compass’ and delivered in an official Communication, detailed in a set of Annexes, and summarised in a 5-page factsheet.

In 2025, the EC’s legal and non-legal itinerary is vast, including these new initiatives:

• A new plan for Europe’s sustainable prosperity and competitiveness: 20 items
• A new era for European Defence and Security: 11 items
• Supporting people, strengthening our societies and our social model: 4 items
• Sustaining our quality of life: food security, water and nature: 5 items
• Protecting our democracy, upholding our values: 4 items
• A global Europe: Leveraging our power and partnerships: 3 items
• Delivering together and preparing our Union for the future: 2 items.

NB: each item is aligned with a respective policy objective. There are 11 x ‘simplification’ legislation items scheduled for 2025, including ‘Omnibus’ legal packages covering both ‘sustainability’ (Q1-2025) and ‘investment simplification’ (Q2-2025). Other policy areas include ‘Competitiveness’, ‘Decarbonisation, ‘Innovation’, ‘Security’, ‘Migration’, ‘Social fairness’, ‘Democracy’, ‘Equality’, and ‘Geopolitics’.

3. EC point to ‘a simpler, faster Europe’

The EC also published a supporting communication document: ‘A simpler and faster Europe’.

This frames the latest 2025 work schedule within their entire 5-year mandate period.

It sets out the EC’s broader “vision for an implementation and simplification agenda that delivers fast and visible improvements for people and business, for a more prosperous, decarbonised and resilient EU”.

To achieve this, the EC will now use the following ‘tools and actions’ until June 2029:

• Reduce ‘administrative burden’: at least 25% for all EU companies, to cut recurring costs by €37.5 bn;
• Prioritising new simplification measures: ‘Omnibus’ packages, EU Digital and Common Agricultural Policy;
• Gradual stress-testing of EU legislation: ‘fitness checks’ to evaluate individual laws and whole policy areas;
• A simpler, more focused, impactful EU budget: to ensure timely, effective implementation of EU funds;
• ‘Direct outreach’ per ‘reality checks’: verifying directly with companies if EU legal premises are correct and deliver the required benefits.

The EC communication is also summarised in another factsheet.

B) EU sustainability latest

 1. EC publish legal package to ‘simplify’ EU-ESG reporting

“The EU’s sustainability reporting and due diligence framework is a major source of regulatory burden, magnified by a lack of  guidance to facilitate the application of complex rules and to clarify the interaction between various pieces of legislation.”
‘The future of European competitiveness’ [Draghi report], September 2024

a) Background

An ‘Omnibus’ is a rarely-used type of EU law, used to modify many legal regimes (via one new piece of legislation).  In 2023, it was used to apply the landmark EU Single Access Point (ESAP) across many Directives and Regulations.

Today, the EC published their first 2025 ‘Omnibus’ package (covering ‘Sustainability’). It aims to ‘simplify’ the corporate ESG reporting and compliance requirements, as part of the overall goal to reduce the EU administrative burden by 25%.

The EC’s press statement was supplemented by a ‘Questions and answers’ and Staff Working Documents (which supply detailed analysis of the rationale and expected impact).

As expected, legal changes mostly relate to the Corporate Sustainability Reporting and Due Diligence Directives (CSRD, CSDDD) and the Taxonomy Regulation (TR). The Sustainable Finance Disclosure Regulation (SFDR) is not directly impacted at this stage.

b) Summary of ESG ‘Omnibus’ package:

The proposed legal changes are extensive and complex; they are best summarised in three parts:

i. ‘Omnibus I’: Corporate sustainability reporting, due diligence, carbon transition

The first part of the EC’s ‘Omnibus package’ proposes to:

• Amend the CSRD and the CSDDD regimes: to make “sustainability reporting more accessible and efficient”;
• Postpone key corporate sustainability deadlines: CSRD reporting deferred until 2028 for certain firms; CSDDD regime transposition moved to now July 2027; large company due diligence moved to July 2028;
• Simplify the carbon border adjustment mechanism (CBAM): for a “fairer trade”

ii. ‘Omnibus II’: InvestEU

The second part of the EC’s ‘Omnibus package’ will amend the ‘InvestEu’ Regulation to “unlock opportunities”.

‘InvestEU’ is an EU programme to support sustainable investment, innovation, and job creation across Europe. It is made up of a Fund, Advisory Hub and Portal. Currently, 45% of its operations support climate objectives.

NB: there will be no public consultation on these ‘Omnibus’ proposals. They have been passed directly to the European Parliament (EP) and the Council (CoEU) for their consideration (as ‘priority’ items). They will enter into force once the final, co-approved laws are published in the EU Official Journal.

iii. Taxonomy Reporting

The Omnibus package is accompanied by a proposal to simplify the Taxonomy Regulation disclosure templates to enable a 70% reduction of current data points.  The EC will introduce a 10% de minimis threshold (meaning many Taxonomy eligibility/alignment calculations can now be excluded). Options to simplify complex ‘Do No Significant Harm’ DNSH criteria are also presented.

NB: These additional measures will be adopted after a public consultation (now open until 26 March). If accepted by the EP/ CoEU, they will legally apply from 1 January 2026.

c) Next Steps

The EC proposals mark a major legal turnaround and will continue to attract market attention and varying opinions.  If co-approved by the EP and CoEU, the EC estimate saving over €6 billion p.a. in EU admin costs while enabling an extra €50 billion of public and private investment.

Fund firms and legal experts are now poring over the small print, to gauge the interim and long-term impact. More to follow.

2. SFDR Level 1 review results postponed to Q4-2025

The EU Commission’s 2025 work programme confirms that the results from their SFDR Level 1 impact assessment (including necessary ‘SFDR II’ legal changes) will not appear until Q4-2025.

Some industry sources understand this latest delay is partly due to continued uncertainty over whether the EC should endorse the draft revised SFDR ‘Level 2’ RTS (i.e. despite their recently declared “new drive to speed and simplify” and “new approach to tackle all sources of regulatory burdens”).

Meanwhile, most EU fund firms are now contemplating their ‘article 8/9’ transition to one of the likely future ‘SFDR II’ product categories. Aside from ‘Sustainable’, ‘Transition’ and ‘ESG collection’, some asset managers prefer additional categories (e.g. for ‘Impact’ investing, which was excluded by the EU Platform on Sustainable Finance, due to the lack of SFDR legal definition).

3. EU-ESG fund naming deadline draws near

Another reminder of the ‘Fund names using ESG-related terms’ guidelines, published by the European Securities & Markets Authority (ESMA).

To avoid any charge of ‘greenwashing’, EU fund firms have until 21 May to make sure all existing product names do not contain any “misleading” terms (as specified by ESMA).

C) EC retail investor policy latest

 1. Retail Investment Strategy: EU trilogue to start March

The EU Commission’s latest work schedule (Annex III) lists 123 x previously drafted laws, now pending approval by the EU Parliament and Council (EP, CoEU).

This includes both parts of the original Retail Investment Strategy (RIS) package, i.e.

• a draft Directive to apply the ‘Value for Money’ concept to UCITS, AIFMD, MiFID and IDD regimes;
• a draft Regulation to ‘modernise’ the EU-PRIIPS KID.

Reflecting the views of many fund firms, the German BVI have called for the EC to “not let the EU Retail Investment Strategy become law”, as “the proposal does not achieve any important political objectives, such as getting retail investors to the capital markets or improving investor protection. All that remains is bureaucracy for providers, customers, and supervisors. It is easier to prevent new bureaucracy than to reduce existing ones.”

Separately, the director-general of EFAMA told an ESMA conference the RIS “will do absolutely nothing” to boost EU retail investment “because it focused too heavily on costs”. He is “200% convinced …the main reason why most of our citizens in the EU are not invested in capital markets has nothing to do with cost, it’s about risk aversion.”

At this stage, there is no evidence the EU-RIS will be withdrawn. It is currently expected that the long-delayed EU-RIS ‘Trilogue’ discussions will begin mid-March.

However, Poland (current holders of the CoEU presidency) are clearly pre-occupied elsewhere; there is also no mention of the Retail Investment Strategy either as a priority item, or within their detailed 6-month programme.

2. EC: launch call for evidence on Savings and Investments Union

"… not a new product as such, but more a new account or a wrapper that can be at the receiving end of different types of simple products."
Hélène Bussières, Head of EC Asset Management unit [speaking at AFG conference], 9 February 2025

The EC’s work plan states a ‘Savings and Investments Union’ communication will follow during Q1-2025.

They had earlier announced the Savings and Investment Union (SIU) as a new strategy for “supporting household wealth creation by increasing the risk-appropriate savings returns of EU citizens, while widening the financing opportunities for businesses”. It aims to “unlock funds to boost the EU’s sustainable competitiveness, support innovation, drive the clean transition and promote digital and tech diffusion.”

The SIU is part of the EC’s new ‘compass’ (i.e. as the means to “create new savings and investment products”).  It appears to be an attempt to recast their previous Capital Markets Union (launched back in 2015).

The EC also launched an initial EU-SIU call for evidence, open for feedback until 7 March.

NB: Several firms are fearful of potential damage to the EU-UCITS regime (with total global AUM of €14 tn).

A senior EU Commission official recently told the French AFG they are planning to develop “a tax-incentivised account wrapper to encourage savers to invest more in the bloc’s capital markets”, rather than launching any new product regimes. She also confirmed the EC had “no intention” of only promoting Exchange-traded funds (ETFs), pointing to “many actively-managed funds also with a lot of merits… including low-cost products”.

D) Other EU updates

 1. EU Accessibility deadline looms ahead

 “Union law on banking and financial services aims to protect and provide information to consumers of those services across the Union, but does not include accessibility requirements. With a view to enabling persons with disabilities to use those services throughout the Union, including where provided through websites and mobile device-based services including mobile applications, to make well-informed decisions, …this Directive should establish common accessibility requirements for certain banking and financial services provided to consumers.”
EU Directive on accessibility requirements for products and services [2019/882], June 2019

a) Background

The European Accessibility Act (EEA) was published in the EUOJ back in 2019.

This Directive sets requirements for certain products and services, which must be made accessible to individual consumers with disabilities. It also seeks to rectify recognised legal “disparities” across the various EU member states.

The EEA will come into effect on 28 June 2025, covering providers of the following EU services:

• most electronic communications services;
• audiovisual media services;
• specific EU passenger transport services (e.g. websites, e-tickets);
• consumer banking services (including prescribed MiFID II Investment and Ancillary Services);
• e-books and dedicated software;
• e-commerce services.

b) EAA deadline looms ahead

The EU Commission have now issued an official EAA reminder, asking firms: “are you ready?” They also shared a series of guidelines and support materials, written by accessibility experts.

In due course, EU operators must ensure they design and provide these services in accordance with the cited EEA accessibility requirements (i.e. when provided to consumers after 28 June 2025).

Service providers failing to comply with their obligations will face ‘effective, proportionate, dissuasive’ penalties. These vary across EU member states: fines range from €60-250K, with certain breaches leading to business suspension or 18-month imprisonment for liable corporate members.

The EAA will apply to respective products and services in scope, provided the accessibility requirements do not alter their basic nature or impose a disproportionate burden on firms.

NB: There is also a five-year transition period (ending 28 June 2030) during which “service providers may continue to provide their services using products which were lawfully used by them to provide similar services before that date.”

c) Concerns raised within funds industry

Although the EAA legal definition of ‘consumer banking services’ refers to some MiFID II services, it does not directly amend this EU regime (nor UCITS, AIFMD or PRIIPs).

However, several associations have recently raised concerns that some legal documentation and/or marketing material may be considered to fall into scope, within certain EU member states.

Information is otherwise scarce within the funds industry, with varying (unofficial) indications from local regulators.  More to follow.

2. ESMA report on EU fund costs amid data collection exercise

ESMA have until 16 October 2025 to complete their ‘Report on Costs charged by UCITS and AIF firms’. This depends on input from the continuing ‘one-off’ cost data collection exercise, where pre-selected manufacturers and distributors were given a 28 February deadline to submit fund cost data templates to their local NCAs.

Separately, ESMA published their latest findings on the costs and performance of EU retail investment products. Despite a recent decline in the costs of investing in EU funds, this is said to be “low and varying”, with overall cost levels “remaining high by international standards”.

 3.  ESMA: publish 2026-2028 ‘programming document’

“The years 2026-2028 will be a period of transformation for ESMA, as several new supervisory mandates will be added to ESMA’s remit and ambitious IT projects such as the European Single Access Point will be developed. During this period, ESMA will continue to deliver on the priorities and thematic drivers, while providing technical support to the Commission as it rolls out its priorities for the new legislative cycle.”
Natasha Cazenave, ESMA Executive Director

Finally, for now: as the industry adjusts to the EU Commission’s new pathway and daunting 2025 To-Do list, ESMA have already planned their work schedule for next year (and beyond).

Their new ‘2026-2028 Programming Document’ is an 108-page update on how they intend to deliver the ‘priorities and thematic drivers’ laid out in their previous 2023-28 Strategy.  Notable specific activities include:

• European single access point (ESAP): providing centralised access to publicly available financial services, capital markets and sustainability information, is set to appear in Q4-2026; ESMA’s data hub “will feature dashboards, analytics, and enhanced public access to market data”, per ESAP phase one.
• UCITS / AIFMD: in Q2-2026, ESMA will “progress in the implementation of the envisaged integrated reporting”, with “the objective to reduce compliance costs for market participants and enhance the scope and the quality of data available for relevant authorities, notably in the UCITS domain where a new EU-wide reporting regime will be established”.

NB: in 2026, ESMA expect “further mandates under SFDR and other files under negotiation such as the Retail Investment Strategy (RIS)”. They also said “the EC’s assessment and review of the PRIIPs Regulation and SFDR may give rise to regulatory technical standards and requests for technical advice”.

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Article written by Mark Kilbride [Regulatory Affairs Advisor, Kneip Product team].

Feel free to contact me at [email protected].