Sustainability update

• European Council outlines its expectations for New European Competitiveness Deal
• European Parliament approves delaying EU Deforestation Regulation
• CDP and EFRAG interoperability to support CSRD compliance
• ESAs finalise rules to facilitate access to information via ESAP
• IOSCO welcomes ISSA 5000
• IOSCO’s report on transition plans disclosures

Commissioners-Designate appear in front of the European Parliament

From 4 to 12 November, the European Parliament (EP) committees held confirmation hearings for the Commissioners-Designate (CDs). The Members of the E P (MEPs) had the chance to assess candidates’ competence and suitability for the assigned posts before voting on their appointment to the European Commission (EC):

• Albuquerque (CD for Financial Services and the Savings and Investments Union) emphasised the need to ensure that the sustainable finance framework is usable, especially by SMEs. She also noted that reporting requirements should be streamlined to reduce burden for companies. She committed to establishing a proper labelling system for green and transition investments under the Sustainable Finance Disclosure Regulation (SFDR) to combat greenwashing risks.
• Dombrovskis (CD for Economy and Productivity, Implementation and Simplification) stressed that simplification did not mean deregulation or compromising high social and environmental standards. He noted that it was essential to help small mid-caps meet their obligations and address how SME rules can be applied to them.
• Hoekstra (CD for Climate, Net Zero and Clean Growth) noted that the Clean Industrial Deal, which will be presented in the first 100days, is meant to enhance competitiveness by supporting decarbonisation, easing permitting, unlocking finance and ensuring affordable energy prices.
• McGrath (CD for Democracy, Justice and the Rule of Law) highlighted his commitment to timely and effective implementation of the Corporate Sustainability Due Diligence Directive (CS3D). He emphasised the need for detailed guidelines and support measures to ensure timely CS3D compliance by companies.
• Roswall (CD for Environment, Water Resilience and Competitive Circular Economy) advocated for the EU Green Deal implementation through simplification without compromising standards, viewing a greener EU as key to its competitiveness worldwide. She will propose the Circular Economy Act which will be the key part of the Green Industrial Deal.

The EP will vote on the full EC composition during the next plenary (25-28 November).

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European Council outlines its expectations for New European Competitiveness Deal

On 8 November, the EU Leaders pledged to make the EU more competitive, innovative, and sustainable, by adopting the Budapest Declaration, which outlines their key expectations. Highlights include:

• ensuring a fully functioning Single Market: the EC should present a strategy on deepening the Single Market, including a roadmap with clear timelines and milestones, by June 2025
• driving European industrial renewal and decarbonisation: the EC is expected to deliver a comprehensive industrial strategy
• reducing administrative, regulatory, and reporting burdens: leaders call for a drastic reduction of at least 25%, urging the EC to make concrete proposals without a delay
• pursuing energy independence and climate neutrality by 2050, committing to build an Energy Union as a matter of priority
• building a more circular and resource-efficient economy: the EC is expected to propose its Circular Economy Act

During the press conference, EC President Von der Leyen also indicated that the EC will come forward with an omnibus proposal tackling many different legislative pieces at once to reduce reporting burden and bureaucracy.

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European Parliament votes to delay EU Deforestation Regulation and introduces new amendments

During its plenary session, the EP voted in favour of postponing the application date of the EU Deforestation Regulation by 12 months:

• 30 December 2025 for large operators
• 30 June 2026 for small and micro-enterprises

The Regulation aims to ensure that products derived from certain commodities, whether sold within the EU or exported, are deforestation-free.

The EP also approved other new amendments to the text, proposed by the European People’s Party (EPP) during the plenary. One of the amendments suggest creating a ‘no risk’ category of countries that would benefit from simpler requirements.

The file has been referred back to the responsible EP committee and it will have to go through trilogue negotiations.

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CDP and EFRAG interoperability to support CSRD compliance

At COP29, the Carbon Disclosure Project (CDP) and EFRAG announced extensive interoperability between CDP’s questionnaire and ESRS E1 Climate change. This partnership aims to reduce the reporting burden for companies and to support organisations worldwide in complying with the CSRD. The organisations confirmed that they will:

• publish a comprehensive mapping in early 2025
• explore how to strengthen ESRS alignment in 2025, alongside delivering insights on ESRS-aligned response data to the market

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ESAs finalise rules to facilitate access to information via ESAP

The European Supervisory Authorities (ESAs) – EBA, EIOPA, ESMA – published their final report on the Implementing Technical Standards (ITS) as mandated by the European Single Access Point (ESAP) Regulation. The draft ITS specify:

• detailed requirements for collection bodies
• requirements for ensuring information is easily accessible to users

The ESAs submitted the ITS to the EC for adoption within three months. The period may be extended by the EC for one additional month.

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ESMA releases enforcement priorities for 2024 corporate reporting

The European Securities and Markets Authority (ESMA) released its annual statement on the European Common Enforcement Priorities (ECEP) for the 2024 annual financial reports of issuers listed in the European Economic Area’s (EEA) regulated markets. ESMA and European enforcers will focus on the following topics in 2025:

• IFRS financial statements: liquidity considerations, accounting policies, judgments, and significant estimates
• sustainability statements: their scope and structure, materiality under ESRS, and disclosures relating to Article 8 of the Taxonomy Regulation
• the European Single Electronic Format (ESEF) reporting: common errors found in the statement of financial position.

The public statement also emphasises the importance of connectivity between financial and sustainability statements.

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ESMA issues information for EU Green Bond external reviewers during transitional period

The EU Green Bond Regulation (EUGB) starts applying as from 21 December 2024. Green bond verifiers must register with ESMA to be able to verify green bonds as from 21 June 2026. During the transitional period (21 December 2024 – 21 June 2026), external reviewers can provide external review services after notifying ESMA and providing requested information as outlined in the EU Green Bond Regulation.

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Trade associations call on European Commission to clarify CS3D implementation and deliver timely guidance

Several European associations issued a joint a statement, Towards EU due diligence rules that work for all, asking the EC to:

1. immediately conduct the CS3D competitiveness assessment with input from businesses and associations to identify priority areas for simplification, clarity, and burden reduction in upcoming legislation and guidance
2. adopt guidelines and implementing legislation at least two years before mandatory compliance, or extend the transition period

closely monitor transposition measures whilst coordinating with the Member States to ensure that divergence with the Directive is minimised

IOSCO welcomes ISSA 5000

The International Organisation of Securities Commissions (IOSCO) Board issued a public statement congratulating the International Audit and Assurance Standards Board (IAASB) on the ISSA 5000 finalisation after the Public Interest Oversight Board (PIOB) certified the ISSA 5000.

IOSCO reiterated its support as ISSA 5000 meets the public interest need for a profession agnostic assurance standard. In its statement, IOSCO also noted that ISSA 5000 can support high quality assurance engagements, enhancing consistency, comparability, and reliability of sustainability information. Also, the standard is expected to strengthen investor trust in sustainability information.

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IOSCO’s report on transition plans disclosures

IOSCO issued a report on how transition plans disclosures can support investor protection and market integrity. It highlights how investors and other stakeholders use transition plan disclosures, their views on the current landscape, and the potential benefits of further guidance. Based on the findings and challenges identified in this report, IOSCO singled out actions across four key areas:

• promoting consistent and comparable transition plan disclosures
• encouraging assurance of transition plan disclosures
• improving the legal and regulatory clarity and oversight
• building capacity

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IFRS publishes progress report on climate-related disclosures

The key findings of the International Financial Reporting Standards (IFRS) Foundation’s progress report are:

• 82% of companies disclosed information in line with at least one Task Force on Climate-related Financial Disclosures (TCFD) recommended disclosures
• 2–3% of companies reported in line with all 11 TCFD-recommended disclosures
• more than 1,000 companies referenced the International Sustainability Standards Board (ISSB) in their reports
• 30 jurisdictions are progressing toward adopting ISSB standards in their regulatory frameworks

Also, the IFRS conducted a separate analysis of the 30 jurisdictions that are introducing ISSB standards, evidencing that they value Scope 3 GHG emissions disclosures and industry-specific disclosure requirements.

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OECD highlights link between finance and climate goals in latest report

The Organisation for Economic Cooperation and Development (OECD) issued a report highlighting the importance of aligning finance with climate policy goals to achieve net-zero greenhouse gas emissions (GHG) and resilience to climate change. OECD focused on three core questions:

• how is climate alignment of finance assessed?
• what do we know about current finance flows and stock?
• what evidence exists on the role of financial sector policies and actions?

The report outlines actions for policymakers and financial sector stakeholders to improve the evidence base and better align finance with climate goals. It further sets out good practices on how to prevent greenwashing.

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FRC on sustainability reporting assurance in the UK

The Financial Reporting Council (FRC) published findings from its sustainability reporting assurance market study in the United Kingdom (UK). This study aimed to assess how the assurance market was functioning and developing in the country.

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