On 21 April 2021, the European Commission adopted a comprehensive package of measures to reorient the flow of funds towards more sustainable investments. An integral element of this sustainable finance package is the Corporate Sustainability Reporting Directive (CSRD) proposal.1
The proposal builds on and revises the sustainability reporting requirements of the Non-Financial Reporting Directive (NFRD) to better align sustainability reporting with the broader regulatory framework for sustainable finance.2 The objective of CSRD is to ensure that financial market participants and financial advisors possess the information necessary to meet the disclosure requirements set forth in the Sustainable Finance Disclosure Regulation (SFDR).3
The need to make sustainability-related information available to the financial industry has been highlighted in our previous article – SFDR: Is the financial services industry ready for disclosure? Commenting on challenges around implementing the principal SFDR requirements, we stated that:
“How difficult the implementation will be for financial products that take sustainability aspects into account, and for financial market participants or financial advisors, depends largely on the availability of the relevant ESG data. ESG data is required by the Regulatory Technical Standards (RTS) as Level 2 measures to complement the SFDR requirements. Furthermore, the obligation of investee companies to make this ESG data publicly available plays an important role.”
In this article, we describe how the CSRD proposals fit into the EU Sustainable Finance Framework and summarize its key features in terms of in-scope definitions, reporting standards and usability of the reported data, as well as the audit requirements of the reported sustainability information.
1 Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting
2 DIRECTIVE 2014/95/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groupsw
3 REGULATION (EU) 2019/2088 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 November 2019 on sustainability‐related disclosures in the financial services sector