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    SMSG Advises ESMA on EFRAG Proposals on Sustainability Reporting

    The Securities and Markets Stakeholder Group (SMSG) published its advice to the European Securities and Markets Authority (ESMA), in the context of the consultation of the European Financial Reporting Advisory Group (EFRAG) on the first set of exposure drafts on the European Sustainability Reporting Standards (ESRS).

    The consultation on exposure drafts of the first set of ESRS was launched at the end of April 2022 to meet deadlines for submitting the first set of draft ESRS to the European Commission by November 2022. These exposure drafts correspond to the first set of standards required under the Corporate Sustainability Reporting Directive (CSRD) proposal and cover cross-cutting standards and topical standards on the full range of sustainability matters—environment, social, and governance with a sector-agnostic angle. The SMSG welcomes the publication of the exposure drafts on the ESRS that provide key elements framing the architecture and clarifying key concepts and content of the CSRD proposal. SMSG also welcomes EFRAG's work as it is an essential prerequisite for the implementation of the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation. However, in its advice, the SMSG is expressing its concern about the sequence of implementation and the deadline for the adoption of certain Delegated Acts and the entry into force of the aforementioned legislation.

    SMSG recommends to extend the deadlines so that EFRAG can have sufficient time to submit its technical advice to the European Commission. SMSG also suggests clarifying the definitions across the cross-cutting and topical standards and the scope of the reporting perimeter in the value chain as well as circumstances under which stakeholder interests have to be considered. The SMSG emphasizes that the complexity of obtaining appropriate European Union compliant data from non-European Union undertakings within the value chain and the political, strategic and economic implications for European consumers should be thoroughly analyzed. SMSG suggests that, to foster maximum operability of the framework for preparers and comparability across preparers and sectors for investors, the balance between sector-agnostic and sector-specific disclosure obligations should be reviewed. SMSG also suggests that a phasing-in option starting with a restricted value chain scope should be followed as well as the concept of materiality and of the rebuttable presumption should be further clarified. Finally, the SMSG opines that it is important to prepare and plan for a well-calibrated standard for small and medium-size enterprises (SMEs) in the standard-setting exercise.


    Related Link: Advice (PDF)


    Keywords: Europe, EU, Banking, Securities, EFRAG, ESG, Reporting, Exposure Draft, Sustainability Reporting Standards, ESRS, CSRD, SFDR, Sustainable Finance, Taxonomy, SMEs, SMSG, ESMA

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