Response of the Platform on Sustainable Finance to the call for feedback on the draft European Sustainability Reporting Standards (ESRS) Del
07 July 2023
Platform’s approach and key recommendations
The Corporate Sustainability Reporting Directive (CSRD)1 is framed by the double-materiality perspective inherited from its predecessor the Non-Financial Reporting Directive (NFRD)2. It is a unique and distinctive building block of the Directive. Recital (29) of the CSRD elaborates on the double-materiality perspective (impact materiality and financial materiality) and emphasises that ‘undertakings should consider each materiality perspective in its own right and should disclose information that is material from both perspectives as well as information that is material from only one perspective.’
The Platform believes that climate change is of utmost importance for all entities that fall under the scope of the Directive. Even when it might not be material from a financial perspective, all economic actors ought to reach net zero emissions. All entities can play a role in achieving net zero even if they are acting as catalysers by ensuring their facilities are net zero, their sourcing policies minimise emissions and their operations are conducted in the most carbon efficient way, in line with the recently published Commission Recommendation on facilitating finance for the transition to a sustainable economy3.
The Platform also believes that biodiversity impacts and transition plans should be mandatory to disclose if impacts are deemed material for the economic activities conducted by the entity.
The Platform underlines the need to ensure that financial market participants (FMPs) and financial institutions (FIs) have access to all relevant information required for their own reporting.
While there is full consensus in the Platform on the relevance of the ESRS E1 and climate standards, biodiversity impacts and transition plans and on the need to provide FMPs and FIs with the necessary information in order for them to fulfil their fiduciary and regulatory duties; there is a slight divergence on how it should materialise.
The vast majority of the Platform is of the view that the ESRS E1 and climate standards and the information required for regulatory purposes by FMPs and FIs are material for all entities and should not be subject to a materiality assessment. For those companies that conduct economic activities with little impact (ie. Those that conduct low environmental impact activities as per the Taxonomy language), reporting should be adjusted in the level of detail demanded within the standards e.g. transition plans.
There is, however, a minority view that believes in a different approach that ensures a cohesive reporting infrastructure while respecting the principle of materiality. They are of the opinion that if the assessment of the mandatory indicators under Sustainable Finance Disclosure Regulation Regulatory Technical Standards (SFDR RTS)4, Taxonomy Regulation5, the Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR) Pillar 3 review, and the Benchmark Regulation (BMR)6 which financial institutions are required to report lead to the conclusion that specific information from corporates is strictly needed, those limited indicators should be introduced in the ESRS 2 General disclosures in a simplified reporting table for non-material information. The format of the disclosure should not require any further contextual information and should not trigger any other reporting requirements in the standards....
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