A coalition of almost 100 European asset managers, banks, environment social and governance fund associations and other financial firms have called on the European Commission to amend its ESG reporting rules, claiming they are not strong enough.
The group, which includes Fidelity, Candriam and five ESG foundations such as the European Sustainable Investment Forum (Eurosif), have requested the Commission to alter most recent amendments to the European Sustainability Reporting Standards (ESRS).
The law will determine how much ESG data needs to be disclosed to investors by about 50,000 companies.
The coalition has said current proposals do not give the required data needed to make informed ESG decisions.
In a joint statement, they said, “We are concerned by the proposals to move away from requiring certain key disclosure indicators to be reported on a mandatory basis, which will instead be subject to materiality assessment.
We see this as a significant rollback of ambition compared to that envisaged by the European Financial Reporting Advisory Group (EFRAG).”
It added, “We recognise the implementation challenges of the ESRS. However, the final draft ESRS set 1 published by EFRAG in November 2022 was already the result of a compromise between all stakeholders.”
This included representatives of the reporting companies, financial markets participants, advisers including auditors and civil society.
The group also objected that after a public consultation, the number of reporting requirements was nearly halved compared to the initial EFRAG proposals.
European Commission president Ursula von der Leyen said she did not want the rules to be so onerous as to hurt competition, and the current proposal is also aligned with International Sustainability Standards Board guidelines.
However, in a public hearing last week, Aleksandra Palinska, executive director of Eurosif, said, “Unfortunately, we feel that investors and other financial market participants’ interests were not duly taken into consideration” when the proposal was drawn up.”
The coalition issued several recommendations to the EU executive body such as maintaining key climate disclosure indicators as mandatory, including Scope 1, 2, and 3 GHG emissions and disclosures enabling investors to assess the credibility of corporate transition plans.
It also suggested that environmental and social indicators relevant to the Sustainable Finance Disclosure Regulation (SFDR), EU Climate Benchmark Regulation and Climate Benchmarks Delegated Acts, Pillar 3 disclosures and other investor reporting regulations are disclosed by in-scope companies on a mandatory basis.
In addition, the coalition asked the Commission to consider changing the optional status of disclosures regarding non-employees and biodiversity transition plans to give investors insight into how companies will conform to the EU Biodiversity Strategy for 2030 and the Kunming-Montreal Global Biodiversity Framework;
Moreover, they want to ensure there is strong compatibility between the ESRS, International Sustainability Standards Board (ISSB), and Global Reporting Initiative (GRI) Standards to reduce fragmentation in global reporting and back cross-border capital flows while upholding the double materiality principle enshrined in Corporate Sustainability Reporting Directive (CSRD) and ESRS.
Once the consultation responses have been submitted, the proposal will be sent to the European Parliament and then the EU Council.
Implementation is planned for 2024, with the first corporate reports due the following year.
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