EFRAG, the European Commission’s financial reporting advisory group, has launched a public consultation on draft EU sustainability reporting standards (ESRS) for corporates, with one aim being to supply investors with information enabling them to meet their own regulatory disclosure requirements.

The consultation on the exposure drafts is open for 100 days, until 8 August, according to a press release dated 29 April that arrived in IPE’s inbox this weekend.

It has been launched without the EFRAG Sustainability Reporting Board (SRB) having reviewed or discussed the exposure drafts, a move that was approved “in order to meet the ambitious deadlines for submitting the first set of draft ESRS to the European Commission by November 2022 and to benefit from the longest public consultation period possible”.

The exposure drafts correspond to the first set of standards required under the proposed Corporate Sustainability Reporting Directive (CSRD) and cover environmental, social and governance (ESG) matters as well as cross-cutting standards.

‘Faithful’ SFDR reporting aim

According to Brussels-based EFRAG, the exposure drafts take account of existing European law and initiatives, with the taskforce responsible for the drafts for example having “endeavoured to make sure” that they cover all principal adverse impact (PAI) metrics (KPIs) investors need to meet Sustainable Finance Disclosure Regulation (SFDR) requirements.

“In order for financial market participants to be able to collect such indicators from their clients, these SFDR PAI KPIs as defined by the Regulatory Technical Standards (RTS) adopted by the European Commission on 6 April 2022, are included in the Exposure Drafts and specifically flagged as being SFDR PAI KPIs,” EFRAG said.

It also said that “significant questions of application and interpretation will likely emerge for a subset of the [PAI] indicators” and that specific questions had therefore been included in the consultation survey to invite feedback “on whether additional application and/or interpretation will be needed to enable faithful reporting on the SFDR indicators through application of the proposed draft standard”.

EFRAG also said that other key ongoing EU initiatives had been considered in the drafting of the reporting standards, notably the recently released proposal by the Commission for a Corporate Sustainability Due Diligence Directive (CSDDD).

The exposure drafts out for consultation were developed by an ESRS project taskforce, which has recently been succeeded by a technical expert group. The taskforce previously published working papers on its draft sustainability reporting standards but this did not form part of any public consultation.

The International Sustainability Standards Board (ISSB), which is aiming to develop a “global baseline” of investor-focussed corporate sustainability reporting standards, released its first two draft reporting standards for public comment at the end of March.

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