Sustaina­ble Finance

Over­hau­led CSR Direc­tive could boost sustaina­ble invest­ments

Making ecologically and socially sustainable investments requires reliable data. The EU’s overhauled Corporate Sustainability Reporting Directive could make a significant contribution in this regard and add some momentum to the sustainable transformation of the economy.

The EU directive on sustainability reporting (officially called Corporate Sustainability Reporting Directive, CSRD) could lead to a significant increase in sustainable investments made by the financial sector. As the GDV underlined in a response to questions asked by the BMJV, this goal can only be achieved if the rules laid down by the directive are simple and tailored, as far as possible, to both the investors and the reporting companies. The CSRD’s motto should be: we don’t need more but better sustainability information – which is to say more relevant, comparable and reliable sustainability reporting.

Proportionality is crucial

The European Commission’s ambitious regulation must still be feasible for companies. That is why the proportionality principle should be embedded more thoroughly in the CSRD. As the GDV has pointed out, the application threshold of the regulation is too low for the financial sector; under the current draft of the regulation, even small insurers with about 50 employees would count as “large companies” and thus be subject to the full extent of the CSRD’s reporting requirements. Such small companies would like to report on their sustainability efforts, too, but they need proportional solutions to do so.

CSRD needs to be part of a consistent framework for sustainable finance

Another important point is that the CSRD needs to be integrated into the complex regulatory framework for sustainability. In some respects it is still unclear how the CSRD will interact with the EU Taxonomy Regulation, the Sustainable Finance Disclosure Regulation (SFDR) and the European Single Access Point (ESAP) and how these different regulations will be linked to each other.

The CSRD is to extend the scope of the current sustainability reporting rules to all large undertakings and listed companies – which means that about 50,000 companies across Europe would be subject to the regulation, according to estimates made by the EU. These companies must also comply with detailed reporting requirements. EU legislators could pass the Directive as early as the second half of 2022, and then all EU member states would be required to implement it.

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