All three of Europe’s financial regulators – collectively known as the European Supervisory Authorities (ESAs) – delivered an opinions on on the first set of ESRS, requested by the European Commission as regards their areas of competences.
European Banking Authority (EBA) Opinion
In particular, the EBA admits the significant improvement of the draft ESRS prepared by EFRAG compared to the versions introduced for consultation. Overall, the EBA commends the consistency of ESRS with international standards and relevant EU Regulation, and a better alignment with the disclosure requirements under the EBA Pillar 3 framework.
EBA welcomes the use of the principle of “double materiality” in the ESRS. However, authority raised concern about the “rebuttable presumption”. In particular, EBA noted that it might undermine a proper materiality assessment and encourage companies to omit relevant sustainability-related information.
When it comes to proportionality, the EBA concluded that the draft ESRS envisage a well-balanced approach with the relevant phasing-in provisions in place. A few aspects merit further consideration by the European Commission, including the timetable for the development of the sector-specific standards for credit institutions.
EBA's opinion may be accessed at: https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Opinions/2023/1051231/EBA-Op-2023-01%20%28Opinion%20of%20the%20EBA%20on%20the%20draft%20ESRS%29.pdf
European Securities and Markets Authority (ESMA) Opinion
The same as EBA, ESMA finds that introduced ESRS broadly meets the objective of being conducive to investor protection and of not undermining financial stability. At the same time, ESMA included set of recommendations to move from “broadly” capable to “fully” capable. These should ensure the alignment between multiple legislative frameworks, definition clarifications and guidance on materiality assessment.
For instance, ESMA is also concerned with the “rebuttable presumption” approach and sees in its implementation the consequent risk in the formation of structured ‘non-disclosure route’, which might lead undertakings to see the ESRS as a ‘menu’ of disclosure requirements they can choose from through a form of ‘comply or explain’ mechanism.
Concerns were also raised in relation to reporting on value chains because of potential difficulties in collecting the required information.
See the full ESMA’s opinion at: https://www.esma.europa.eu/sites/default/files/2023-01/ESMA32-334-589_Opinion_on_ESRS_Set_1.pdf
European Insurance and Occupational Pensions Authority (EIOPA) Opinion
Overall, EIOPA considers that the draft ESRS meet the objectives even though some aspects can be enhanced upon.
Concerning international standards, EIOPA underlines the importance of avoiding the fragmentation of sustainability reporting requirements across jurisdictions. It called for compatibility between ESRS and IFRS to be ensured so European companies reporting according to ESRS are automatically considered to be compliant with the IFRS sustainability reporting framework.
EIOPA's opinion may be accessed at:
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