EFAMA calls for prompt adoption of ambitious mandatory sustainability disclosures under the Corporate Sustainability Reporting Directive
21 April 2021
Insufficient availability of meaningful, comparable, reliable and public ESG data is a key impediment to realising the full potential of the EU's sustainable finance regulatory framework. EFAMA, therefore, encourages the co-legislators to maintain the ambition of this proposal.
The European Commission has published a proposal for a Corporate
Sustainability Reporting Directive (CSRD), paving the way for
much-needed mandatory European sustainability reporting standards (ESS).
Insufficient availability of meaningful, comparable, reliable and
public ESG data is a key impediment to realising the full potential of
the EU's sustainable finance regulatory framework. EFAMA, therefore,
encourages the co-legislators to maintain the ambition of this proposal.
Tanguy van de Werve, Director General of EFAMA, commented: "The limited
scope of the Non-Financial Reporting Directive and the inconsistent
sustainability reporting ecosystem constrain investors' ability to
assess the ESG performance of investments. This CSRD proposal is
essential in reducing the ESG data gaps faced by asset managers and
supporting the development of green investment products. We call on the
co-legislators to maintain the high level of ambition of the
Commission’s proposal and to ensure its swift adoption. Time is of the
essence.”
Dominik Hatiar, Regulatory Policy Adviser at EFAMA, added: “The proposed
mandatory, assured and digitalised European sustainability reporting
standards will be the primary source of input for asset managers’
disclosures under the Sustainable Finance Disclosure Regulation and the
EU taxonomy’s ‘green asset ratios’. In the context of the EU Green Deal
and Recovery Plan, we see the proposed CSR Directive as a key enabler
for taxonomy-aligned sustainable investments and look forward to the
first disclosures becoming available on 1 January 2024."
EFAMA supports the Commission’s proposal as it:
- expands the scope of reporting companies by covering large private undertakings and all undertakings listed on regulated markets, including non-EU companies with securities listed on EU regulated markets.
Asset managers need specific ESG data from as many types of companies
as possible to enable them to i) consider the sustainability risks and
opportunities of their investment decisions; ii) assess the adverse
impact of their investments on (material) sustainability factors and
iii) calculate their green asset ratio based on the taxonomy KPIs of the
investee companies. However, even with the expanded scope, there will
still be a large number of non-EU companies not covered by the CSRD.
Therefore, a globally accepted disclosure system is required.
- requires the Commission to take account of EFRAG´s technical advice on the Delegated Act adopting the ESS.
Whereas the enlarged Non-Financial Reporting Directive (NFRD) scope
will increase the ESG data quantity, the ESS should improve its quality,
usability, and relevance. EFAMA agrees that the ESS should be adopted
in a Delegated Act by 31 October 2022, with complementary,
sector-specific standards expected by October 2023.
- clarifies the principle of double materiality and
requires companies to assess and disclose which information is
material. EFAMA supports the requirement in Article 19a (2) for
companies to report on the process they carry out to identify and
address their Principle Adverse Impacts (PAI) and the risks of most
significant adverse impacts on sustainability matters regarding their
whole value chain. Materiality assessments are crucial as there is a
risk of financially material ESG issues being drowned out by excess
information on ESG topics.
- requires the submission of financial statements and management reports in a single, comparable, electronic format
with digitally tagged sustainability information. This will facilitate
seamless transmission of ESG data into the European Single Access
Point.
- introduces assurance requirements for reported
sustainability information. However, as asset managers need to trust the
provided information, reasonable assurance engagements are more
appropriate than limited assurance.
- seeks legislative consistency with the information
needed to comply with the SFDR RTS (Sustainable Finance Disclosure
Regulation’s Regulatory Technical Standard) disclosure requirements and
the forthcoming taxonomy-related technical screening criteria, thereby
ensuring that the taxonomy can be used in practice.
EFAMA stresses that the timing and content inconsistencies between
the non-financial and financial undertakings' ESG disclosure
requirements remain a real challenge. Whereas companies are unlikely to
provide ESS disclosures before 2024, asset managers will have to report
as of 2022 under the SFDR and the taxonomy on very specific indicators
of the companies in their portfolios.
EFAMA
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