Letter to EFRAG on Draft Sustainability Reporting Standards

FESE fully appreciates EFRAG’s efforts to develop harmonised European standards of environmental, social and governance (ESG) information to enhance transparency, promote investments in ESG activities and ensure that potential systemic risks to the financial system can be addressed. With this letter, FESE wished to share some overarching considerations on certain key aspects and the overall process of developing the Draft EU Sustainability Reporting Standards.

In particular, FESE emphasised the need to increase dialogue at the global level on ESG reporting standards to ensure the consistency of legal frameworks and to avoid overlapping regulatory obligations. Such consistency would be particularly welcome when it comes to the definition of materiality, where we would support an alignment of EFRAG’s double materiality approach, to avoid losing time with future harmonisation needs. In addition, sustainability issues beyond climate considerations should also be examined.

We also suggested introducing a “comply or explain” provision to allow companies to justify their decision not to disclose some indicators, in line with current common practice. Lastly, while we fully embrace the urgency of delivering high-quality standards to companies and the overall investment chain as soon as possible, we fear that the timeline given to EFRAG might be too ambitious and might not allow sufficient time for stakeholders to assess the work done and provide meaningful input.