ESMA has stated that the European Financial Reporting Advisory Group’s (EFRAG’s) first draft of European Sustainability Reporting Standards (ESRS Set 1) is ‘broadly capable’ of meeting investor protection and financial stability objectives.
The standards were measured against the Corporate Sustainability Reporting Directive (CSRD), which considers whether they provide high-quality material sustainability information, allow for consistent content and format application, are interoperable with ESMA’s EU regulations and align with global sustainability reporting standards.
In order to be ‘fully capable’ of meeting the objectives, ESMA recommends that the European Commission addresses technical issues surrounding consistency with EU-wide legislation and clarifies definitions and terminology. It also highlights the need for guidance around the materiality assessment process.
ESMA’s opinion will be considered alongside those of other public bodies including the European Banking Association (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA). ESRS Set 1 will be adopted into delegated acts by 30 June 2023, with ESMA providing continued advice as the standards evolve.
Verene Ross, ESMA chair, says: The development by EFRAG of the first draft set of ESRS is a major achievement. These standards will increase the consistency and quality of information flowing through the sustainable investment value chain. They will also enable broader accountability of European businesses for their sustainability commitments and impacts vis-à-vis retail investors.
“In line with the ESMA Strategy, we will continue to contribute actively to the sustainability reporting standard-setting process, with the aim of supporting the capital markets in financing the transition to a sustainable economy.”
