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    ESMA Responds to Consultation on Sustainability Reporting Standards

    The European Securities and Markets Authority (ESMA) published its responses to the consultation of European Financial Reporting Advisory Group’s (EFRAG) on the first set of draft European sustainability reporting standards.

    ESMA highlights its support for a strong materiality assessment but expresses concern about the suggested rebuttable presumption approach. ESMA recommends EFRAG to remove the rebuttable presumption and thus avoid requiring explanations about the lack of materiality of certain disclosures, emphasize the importance of the materiality assessment, and clarify that the materiality assessment is not intended to pursue proportionality purposes. ESMA also recommends for EFRAG to focus on pursuing proportionality objectives via other means, such as allowing for the gradual phasing-in of certain requirements, reducing the complexity of the requirements themselves, and/or deferring some disclosure requirements to the later development of industry-specific standards. Additionally, ESMA encourages EFRAG to:

    • ensure full consistency when it comes to terminology and definitions in other areas of EU legislation, such as the Taxonomy Regulation.
    • keep engaging with the International Sustainability Standards Board to ensure further alignment of the European sustainability reporting standards and the IFRS Sustainability Standards to benefit both users of sustainability reporting and the companies that prepare the reporting.

    EFRAG is expected to deliver the final draft European sustainability reporting standards to the European Commission in November 2022. In accordance with the Corporate Sustainability Reporting Directive, ESMA will deliver an opinion to the European Commission on this version of the European sustainability reporting standards. The two other European Supervisory Authorities (European Banking Authority and EIOPA) have also been mandated to deliver opinions.


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    Keywords: Europe, EU, Banking, Securities, Disclosures, Climate Change Risk, Sustainable Finance, ESG, SFDR, Sustainability Reporting Standards, EFRAG, ISSB, ESMA

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