A disservice to sustainability reporting

On 7 July 2023 the deadline for commenting on the EU Commission's draft on EU standards for sustainability reporting expires.

A spokesperson for the German Investment Funds association BVI says about the draft:

‘The European Commission is doing a disservice to sustainability reporting. Its draft of the EU reporting standard ESRS will result in asset managers not getting all necessary information from companies that they need for their own reporting obligations. The intended goal of closing information gaps on sustainability and reducing reliance on ESG data providers will be missed.‘ 

‘We call on the European Commission to follow the recommendations of its expert commission EFRAG and adjust the draft. Companies should be required to report on key environmental and social indicators so that asset managers can assess the credibility of companies' transition plans.‘

Background Information

On 9 June 2023, the EU Commission published the draft delegated act for the EU Sustainability Reporting Standard (ESRS). This gives concrete form to the EU Corporate Sustainability Reporting Directive (CSRD). With the present draft, the Commission risks undermining the goals of other EU initiatives for sustainable finance. This is because the new standard is intended to make almost all details of reporting subject to materiality testing by the reporting companies. This would eliminate mandatory reporting, e.g. on all indicators for the most significant adverse sustainability impacts (PAIs). However, such reporting is crucial for asset managers in accordance with the Sustainable Finance Disclosure Regulation (SFDR).