(Bloomberg) -- Asset managers have launched a coordinated appeal to get the European Union to rework planned ESG reporting rules, as investors worry the current proposal doesn’t give them the data they need to make informed decisions and avoid greenwashing.

Close to 100 European investment managers and banks have teamed up with ESG fund associations and a United Nations-backed network of financial firms to put pressure on the EU to tighten an existing proposal for the Corporate Sustainability Reporting Directive. Once passed, the law will determine how much environmental, social and governance data about 50,000 companies need to disclose to investors and other stakeholders.

In a joint statement published on Friday, the European Sustainable Investment Forum (Eurosif) said the current proposal ultimately leaves it up to companies and their advisers “to determine what is, and isn’t, material to report.” That may result in a dramatic reduction in the amount of information that investors get, it said. 

The European Commission, the EU’s executive arm, published its proposal for implementing CSRD last month, and stakeholders have until Friday to respond to a public consultation on the directive. Commission President Ursula von der Leyen has made clear she doesn’t want the rules to be so onerous as to hurt competition. The current proposal is also aligned with guidelines recently unveiled by the International Sustainability Standards Board.

At Thursday’s public hearing, Mairead McGuinness, the EU’s financial services commissioner, said that excessively tough corporate reporting rules could backfire.

“The whole idea of mandatory is great in theory, but I’m not so sure it always works well in practice,” she said. “We would get significant pushback.” But she also warned that companies that think they can under-report “will be caught out.”

The investment industry says that the current proposal for corporate reporting is out of step with the stricter demands being made on asset managers to disclose the ESG risks in their portfolios. Meanwhile, the bloc’s regulators have put the fund industry under review to gauge how well it’s adhering to existing rules. 

“Unfortunately, we feel that investors and other financial market participants’ interests weren’t duly taken into consideration” when the proposal was drawn up, Aleksandra Palinska, executive director of Eurosif, said at a public hearing on Thursday.

In a separate statement, Oliver Moullin, managing director, for sustainable finance at the Association for Financial Markets in Europe, said members face legal risks if the European Commission doesn’t align reporting requirements for financial and non-financial companies.

Other signatories to the joint statement include the European Fund and Asset Management Association, the Principles for Responsible Investment, the Institutional Investors Group on Climate Change and the United Nations Environmental Program Finance Initiative.

The organizations want the commission to make it mandatory for companies to report a number of ESG indicators, including climate data, so investors can assess the credibility of corporate transition plans. 

Once the consultation responses have been submitted, the proposal goes to the European Parliament and then the EU Council. Implementation is slated for 2024, with the first corporate reports due in 2025.

Reducing reporting requirements is important, but the commission “should strike a balance with the overall objectives of the standards,” Moullin said. That includes “to strengthen disclosures, counter greenwashing, and enable financial institutions to fulfill their own disclosures, as well as investment decisions and risk management.” 

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