Ensuring alignment between the Disclosure Requirements of Investee Companies and the Sustainable Finance Obligations

EFAMA published a policy paper discussing the potential implications and inconsistencies in the draft ESRS Delegated Act, which affects investors and the Sustainable Finance legislative framework. The paper focuses on aligning ESG reporting in two key areas: the requirements of the SFDR, specifically the PAIs, and Transition Plans and targets.
The CSRD is considered crucial for providing the financial sector with better data on sustainability risks and their impact on investee companies, the environment, and people. However, the draft ESRS delegated act introduces materiality assessments by reporting entities for most disclosure requirements, including those needed by FMPs to fulfill their obligations under SFDR. This includes PAI reporting, DNSH tests for sustainable investments, and access to climate-related information like scenario analysis, transition plans, targets, and forward-looking information for decarbonization strategies.
The paper advocates for the removal of materiality assessments on indicators crucial for accurate and comprehensive sustainability reporting throughout the investment chain. It argues that climate information, such as greenhouse gas emissions, transition plans, and targets, is always material for companies and should be mandated for disclosure to ensure compliance with EU Climate Law and provide complete climate-related information to investors and asset owners.
Furthermore, the paper emphasizes the need to avoid different phasing-in times between SFDR and CSRD to bridge the data gap caused by materiality assessments. If phasing-in periods are maintained, coverage thresholds for PAIs and clear guidance on extended phasing-in periods should be considered.