The Principles for Reponsible Investment (PRI) announced today the publication of an investor statement, signed by 54 investors representing more than $9 trillion in AUM, supporting the European Commission’s proposals for ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. reporting requirements for companies. Signatories to the statement included major investment firms including Amundi, AXA IM, Federated Hermes, LGIM, and Morgan Stanley Investment Management.
In April 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), to amend the existing reporting requirements of the Non-Financial Reporting Directive (NFRD), the EU directive requiring companies to disclose information on the way they operate and manage socialSocial criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. and environmentalEnvironmental criteria consider how a company performs as a steward of nature. challenges. Among the proposals were extensions of the NFRD sustainability reporting requirements to all large and listed companies, meaning that nearly 50,000 companies will now need to follow detailed EU sustainability reporting standards, as well as more detailed reporting requirements, and a requirement to report according to mandatory EU sustainability reporting standards.
The European Commission has stated that it aims to create a set of rules that will, over time, bring sustainability reporting on a par with financial reporting.
Citing the need for improved sustainability reporting, the statement said:
“Investors regularly report to the PRI that a lack of consistent and comparable sustainability information is a substantial barrier to their responsible investment practice. For investors selling and/or marketing products in the EU, access to comparable, consistent and high-quality corporate sustainability disclosure is even more important to meet the increasing sustainability-related disclosure requirements under regulations such as the Sustainable Finance Disclosure Regulation (SFDR) and EU Taxonomy.”
The statement highlights six key aspects of the CSRD proposal for legislators to take into consideration in order to enable investors to actively contribute to the EU’s green recovery ambitions and emissions reduction targets, and to align the CSRD with the EU sustainable finance strategy. These include extending the scope of the CSRD to include SMEs from high-risk sectors, supporting double materiality including information on companies’ impact on society and the environment, as well as integrated reporting, introducing a timeline for the implementation of an EU-wide assurance requirement, developing sustainability reporting standards, enhancing data accessibility and credibility with a single electronic reporting format, and ensuring that sustainability information is available in a timely manner.
According to the statement, “The CSRD proposal is a prime example of policy coherence between investor and corporate disclosure obligations, building an end-to-end disclosure framework that will enable investors to scale up their contribution to the EU Green Deal and wider sustainability goals.”
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