31 July 2023
- IIGCC welcomes the publication of the European Sustainability Reporting Standards (ESRS) which should help to address data gaps across the EU sustainable finance framework and support investment decision-making
- However, concerns remain about the decision to move away from mandatory climate-related disclosures which will now be subject to materiality assessments – over 90 investors supported our joint statement calling for the Commission to uphold the original ambition of the ESRS
- It will be essential to ensure that appropriate safeguards are put in place to enable investors to access the information they need to finance the transition and meet their own regulatory obligations
This week the European Commission adopted a delegated act setting out the first set of sector-agnostic European Sustainability Reporting Standards (ESRS). The standards are intended to provide investors and other stakeholders with granular reporting on sustainability and climate-related issues, an essential prerequisite for informing investment decisions and allocating capital in line with sustainability goals, including those of the European Green Deal and the EU Climate Law.
IIGCC welcomes the adoption of the delegated act, however concerns remain about the decision to move away from mandatory climate disclosures, which will now be subject to materiality assessments. Instead, companies who do not report on climate will be required to provide a detailed explanation of their materiality assessment, including a forward-looking analysis of when climate change would be considered material.
While this represents a step in the right direction compared to earlier draft versions of the delegated act where no such detailed explanation was required, this approach still risks limiting investors’ access to data they need to assess the credibility of corporate transition plans and their exposure to climate-related risks and opportunities. Crucially, it will also reduce investors’ ability to meet their own mandatory reporting obligations, such as those under the Sustainable Finance Disclosure Regulation (SFDR). Over 90 investors and financial market participants signed IIGCC’s joint statement with Eurosif, PRI, EFAMA and UNEP FI calling for the Commission to uphold the integrity and ambition of the first set of the ESRS, as envisaged by the European Financial Reporting Advisory Group (EFRAG).
It will be vital for the Commission to put in place appropriate safeguards to ensure investors are able to access the data they need to finance the EU’s net zero transition. The Commission must also be mindful of the implications of the proposed approach for the coherency of the EU’s wider sustainable finance framework, including investors’ obligations under SFDR, and proposals to mandate the adoption of transition plans under the forthcoming Corporate Sustainability Due Diligence Directive (CSDDD).
Disclosure remains the foundation of the EU’s Sustainable Finance Action Plan. IIGCC will continue to engage with the Commission and other key stakeholders to promote ambitious and comprehensive ESRS that provide investors with the consistent, comparable, and reliable information they need to finance the transition to a net zero economy.
Disclaimer: This statement was developed by IIGCC but does not necessarily represent the views of the entire membership, either individually or collectively.
About IIGCC
IIGCC brings the investment community together to work towards a net zero and climate resilient future. We create change the world needs by unlocking investor action on climate change.
Our work supports investors in generating returns for clients and beneficiaries, which in turn provides financial wellbeing for future generations. We work with our members to address climate risk and ensure they are well positioned to make the most of investment opportunities offered by climate mitigation and adaptation efforts, ensuring that their investments contribute towards a better world for us all to live in.
Our team supports investors to create practical solutions that can make a real difference in tackling climate change – providing guidance and support on investment practices, policies and corporate behaviours that have real impact and deliver change that the world needs. For more information visit www.iigcc.org and @iigccnews
Media contact
Ross Gillam, Head of Media Relations, IIGCC
E: rgillam@iigcc.org
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