The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today published its response to the IFRS Foundation’s consultation on sustainability reporting. ESMA recommends establishing high-quality international standards while also catering for the needs of jurisdictions that are at different stages in their sustainability efforts.
ESMA’s response to the IFRS Foundation
Following a call from stakeholders, in September 2020, the IFRS Foundation issued a consultation paper to better identify stakeholders’ needs in the area of sustainability reporting and further understand how to address current demands.
ESMA’s response to this consultation suggests that in developing international standards for sustainability reporting, the Foundation builds on the available initiatives and leverages on the experience of jurisdictions, such as Europe, where work is already advanced in terms of principles and requirements for non-financial reporting and sustainable finance. At the same time, ESMA recommends that international standards should cater for the needs of jurisdictions that are at different stages in their sustainability efforts.
Regarding the content of the future standards, ESMA stresses the importance of relying on a broad notion of materiality that emphasises the concept of double materiality, widely known and applied in Europe. ESMA also highlights the need to develop standards addressing all aspects of the ESG spectrum, rather than limiting the focus only to climate.
The response builds on previous ESMA public positions in the area of non-financial reporting such as the response to the European Commission’s consultation on the review of the Non-Financial Reporting Directive.
Joint letter of the Chairs of EBA, EIOPA and ESMA
In conjunction with the publication of ESMA’s response, the Chairs of the three European Supervisory Authorities, EBA, EIOPA and ESMA, have also issued a comment letter to the IFRS Foundation’s consultation.
The joint the letter emphasises the following aspects: (i) the global challenges posed by sustainability for investors and other stakeholders and their call for a common set of standards; (ii) it is important to build on existing initiatives and to take key notions such as ‘double materiality’ into account; (iii) it is necessary to address environmental, social and governance aspects beyond climate.
This letter follows on the June 2020 joint response to the Commission in relation to the review of the NFRD in which the three Chairs acknowledged the need for a standardisation solution in Europe, while calling for the development of international standards in the medium term.