Stockholm (NordSIP) – It has been over a year since European Commissioner Mairead McGuinness officially requested the technical advice of the European Financial Reporting Advisory Group (EFRAG), asking them to prepare a draft EU Sustainability Reporting Standards (ESRS). Ahead of the deadline for submitting the first set of draft ESRS to the European Commission in November 2022, EFRAG has been eager to collect feedback through a well-advertised public consultation on the first draft.
On 8 August, the consultation period drew to a close. Eurosif, the leading association for promoting and advancing sustainable and responsible investment in Europe, managed to submit its response to EFRAG just in time.
Logical structure and comprehensive coverage
The feedback from Eurosif is broadly positive, describing the reporting framework as “ambitious and comprehensive” and praising EFRAG for basing it on double materiality and encompassing the full spectrum of ESG topics. According to Eurosif, the draft features “a well-structured architecture that adequately covers all CSRD reporting requirements.”
Paying particular attention to climate-related data, Eurosif notes that the proposed ESRS are highly likely to improve its availability, reliability and comparability. “We support the detailed climate-related disclosure requirements envisaged by the ESRS, as well as the reporting on the assumptions, methodologies and inputs used to determine climate-related projections,” reads the response.
Aligning the various standards
A challenging task that needs to be addressed urgently is the harmonisation between the already existing EU regulatory frameworks. Financial market participants (FMPs) are struggling to reconcile various disclosure requirements, such as the EU Taxonomy and the SFDR. “The ESRS E1 will furnish FMPs with the data they need to comply with both regulations in terms of climate requirements,” notes Eurosif.
Further on the topic of harmonising disclosure frameworks, Eurosif encourages EFRAG to improve the collaboration between standard-setting initiatives even internationally. It will undoubtedly be of great help to investors if the new ESRS are aligned with other standards, such as those developed by the Task Force on Climate-Related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB).
Preserve the ambition
Time is of the essence, according to Eurosif. Stakeholders, both companies and investors, will go through a burdensome adjustment period while initially gathering and analysing the relevant data and developing more sophisticated reporting functions. “That said, we urge standard-setters and policymakers to preserve the ambition of the standard while finalising the text. […] Being less ambitious at the outset will only slow down or prevent this process,” concludes Eurosif.
