ESAs Respond to IFRS Consultation on Sustainability Reporting
The Chairs of ESAs issued a letter in response to the IFRS consultation on sustainability reporting. In the letter, the Chairs agreed that improving data availability and public disclosure by corporates is a key element to foster sustainable growth and strongly support the development of globally accepted non-financial reporting standards to facilitate the disclosure of meaningful and comparable metrics on environmental, social and governance (ESG) aspects. They also support that international standards should build on existing jurisdictional and international initiatives, including those of EU. ESMA also published a detailed response to this consultation on sustainability reporting. In its response, ESMA recommends establishing high-quality international standards while catering to the needs of jurisdictions that are at different stages in their sustainability efforts.
IFRS had issued a consultation paper in September 2020 to better identify stakeholder needs in the area of sustainability reporting and further understand how to address current demands. In their response to the consultation, ESAs support IFRS with the expertise built in the European regulatory and supervisory community in its ambitious and important endeavor to improve sustainability reporting globally. The joint letter highlights that any non-financial reporting standards and underlying methodologies will have to be sufficiently clear to be auditable and enforceable, also emphasizing the following aspects:
- The letter notes the importance of global challenges posed by sustainability for investors and other stakeholders and their call for a common set of standards. ESAs support the IFRS initiative to consider the potential for globally accepted sustainable reporting standards to promote internationally consistent and comparable non-financial reporting. ESAs point out that, to be successful, any future standards should cater to jurisdictions that are at different stages of development in the area of sustainable finance, while ensuring that the best and most advanced available practices are used as a basis for the development of these standards.
- It is important to build on the existing initiatives and to take key notions such as double materiality into account; the aim of this should be to enhance the relevance of disclosures and require reporting on the impact of sustainability risks on business models as well as the impact of businesses on sustainability factors.
- Additional aspects of ESG, beyond climate, need to be addressed.
The ESA letter and ESMA response follow the June 2020 joint response of ESA Chairs to EC in relation to the review of the Non-financial Reporting Directive, also known as NFRD. In the June response, the three ESA Chairs had acknowledged the need for a standardization solution in Europe, while calling for the development of international standards in the medium term. The ESMA response to this consultation notes that, in developing international standards for sustainability reporting, IFRS builds on the available initiatives and leverages on the experience of jurisdictions, such as Europe, where work is already advanced in terms of principles and requirements for non-financial reporting and sustainable finance.
Related Links
Keywords: International, Europe, EU, Banking, Insurance, Securities, ESG, Climate Change Risk, Reporting, Double Materiality, Non-Financial Reporting, NFRD, IFRS, ESAs
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
EIOPA Updates Data to Calculate Volatility Adjustments Under SIIRelated Articles
BIS Innovation Hub Sets Out Work Program for 2021
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
EC Plans to Consult on Crisis Management and EDIS Framework Revisions
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA Finalizes Remuneration Standards for Investment Firms in EU
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
ECA Recommends Actions to Enhance Resolution Planning for Banks
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA Proposes Rules on Identity Verification of Depositor Protection
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB Publishes Work Program for 2021
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA Issues Update on Move to New Data Collection Platform
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank Publishes Derivation Rules for Reporting by Banks
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.