Draft sustainability reporting standards meet objectives but could be enhanced – EIOPA

Written by Jack Gray

31/01/2023

The draft European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG), meet their objectives but some aspects could be enhanced upon, according to the European Insurance and Occupational Pensions Authority (EIOPA).

In its first ‘Opinion’ on the standards, EIOPA assessed whether the draft ESRS promote disclosure of high-quality sustainability data, whether they facilitate interoperability with other EU legislation and global standards, and whether they are conducive to a consistent and proportionate application by undertakings.

EIOPA concluded that the draft ESRS met the objectives it was assessing, although some aspects could be enhanced upon.

The authority welcomed the general approach on the materiality assessment and the mandatory disclosure requirements that it said were crucial for financial market participants to calculate and report their principle adverse impact indicators under the Sustainable Finance Disclosure Regulation (SFDR).

However, EIOPA believed that further clarity was needed on the boundaries of the value chain for insurers and pension funds so the relevant material sustainability impacts could be reported in a “proportionate and risk-based manner”.

On the ESRS’ consistency with EU standards, EIOPA said that further guidance may be required to improve comparability with certain SFDR-related indicators and that continued discussions among all relevant stakeholders would be beneficial to ensure consistent coherent implementation.

Furthermore, the authority stated it was crucial that any amendments to the SFDR Delegated Regulation in the future were reflected in ESRS.

On international standards, EIOPA emphasised the importance of avoiding the fragmentation of sustainability reporting requirements across jurisdictions.

It called for compatibility between ESRS and IFRS to be ensured so European companies reporting according to ESRS are automatically considered to be compliance with the IFRS sustainability reporting framework.

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