The European Commission’s proposal for a Corporate Sustainability Reporting Directive (CSRD) envisages the adoption of EU Sustainability Reporting Standards (ESRS). In this context, the European Financial Reporting Advisory Group (EFRAG) was requested to provide technical advice to the European Commission in the form of fully prepared draft standards and/or draft amendments to Sustainability Reporting Standards that contribute to the delegated acts through which the ESRS will be adopted by the EU.

The Exposure Drafts published correspond to the first set of standards required under the CSRD proposal and cover the full range of sustainability matters: environment, social, governance and cross-cutting standards.

UNEP FI welcomes the EFRAG’s publication of the ESRS Exposure Drafts and has responded to the public consultation. The response has been submitted through the online form provided.  The key points can be found below.

  • UNEP FI sees a positive interoperability and consideration of other existing standards (including TCFD, ISSB, SEC) in the ESRS Exposure Drafts. Further coordination between standard-setters is critical.
  • While UNEP FI understands that the majority of relevant pieces of regulation have been taken into account, we highlight the need for further assessment of how the ESRS will interact with the European Single Access Point, the upcoming Due Diligence Directive and the need for interoperability with other disclosure requirements that may overlap with the ESRS.
  • Regarding the linkages between financial and sustainability reporting, UNEP FI favors closer alignment and complete integration of the sustainability reporting information to make sure that the sustainability decisions are backed up with financial information.
  • UNEP FI agrees with the double materiality approach and emphasizes the importance of the explanations and implementation principles on verification and assurance of impact.
  • UNEP FI highlights the critical need for the reported information to be traceable and immutable, allowing for a more holistic assessment which also takes into account both backward-looking reporting and forward-looking scenarios/projections.
  • UNEP FI recommends caution when introducing the “rebuttable presumption” concept. This approach may hamper an effective materiality assessment by the relevant parties, as well as one that may generate a lack of comparability between reporting standards and produce an inconsistent reporting landscape.
  • UNEP FI acknowledges the climate standard put forward by EFRAG as a very comprehensive one with clear asks and detailed reporting templates, complementing other reporting requirements. However, targets could be improved by adding metrics for the most energy-intensive sectors and asking companies to further disclose their GHG emissions according to the Corporate Standard and the scenario they have used to assess their 1.5ºC alignment.

Since the issuance of the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, UNEP FI has led pilot programmes for dozens of banks, insurers and institutional investors on climate risk and financial disclosures. UNEP FI is also critically engaged with global standard setters through the ISSB and the Impact Management Platform, and works to foster EU Taxonomy disclosures implementation by banks.

On the regulatory front, UNEP FI flags to policymakers around the globe progressive and proactive policy action for a sustainable financial system, informed by practitioners’ perspectives. It works with its members and the sustainable finance community to promote sustainability across the finance industry and works towards global alignment of standards to ensure an enabling environment for a global sustainable economy.

For more information, please contact Daniel Bouzas.