June 2022

  • CSRD ongoing trilogues
  • ECON votes on the EC’s green bond standard proposal
  • EFRAG continues its work and starts outreach on ESRS
  • ISSB progresses its standard-setting work
  • IFRS takes first steps to develop a taxonomy for ISSB Standards

Sustainability assurance under the CSRD

Accountancy Europe’s new discussion paper provides insights from practice on key matters related to the European Commission’s (EC) Corporate Sustainability Reporting Directive’s (CSRD) new EU-wide requirement for limited assurance on sustainability information.

Professional accountants have been providing assurance services on sustainability information to companies in the EU for over two decades. In this paper, we pose questions to stakeholders, including policymakers and standard-setters to reach a common understanding on the practical implications of the new requirement.

We aim for more clarity to:

  1. properly define the information subject to assurance
  2. foster a common understanding of the work effort to reach limited assurance amongst all stakeholders across the EU
  3. identify the pathway to move from limited assurance to reasonable assurance in the medium term
  4. deal with reported forward-looking information
  5. establish a level playing field for all assurance practitioners
  6. agree on the preconditions that need to be met for assurance
  7. ensure that assurance standards are fit-for-purpose
  8. inform all stakeholders who will need to implement the CSRD assurance requirement

Debating these matters early will ensure high quality and consistent application of assurance services across the EU. Join the discussion in our upcoming interactive online workshop on 22 June, 15:00-17:00 CEST. Register here.

CSRD ongoing trilogues

On 2 June, rapporteur Pascal Durand (RE/France) reported back to the European Parliament’s (EP) Legal Affairs Committee (JURI) on the ongoing CSRD negotiations. MEP Durand noted that negotiators are still having difficulties reaching a compromise on:

  • non-EU companies’ inclusion in the scope
  • equivalence requirements
  • sanctions
  • mandatory audit split for provision of assurance services

The rapporteur also noted that negotiators are close to reaching a compromise on listed small and medium-sized enterprises (SMEs), subsidiaries exemption and provision of limited and reasonable assurance services.

The last political trilogue is likely to take place on 21 June.

ECON votes on the EC’s green bond standard proposal

On 16 May, the EP’s Economic and Monetary Affairs (ECON) Committee adopted its position on the EC’s green bond standard proposal (with 44 votes in favour, 12 votes against and three abstentions). ECON also voted in favour of entering trilogues (with 46 votes in favour, 12 votes against and one abstention).

The EP proposes to, amongst other points:

  • extend the scope to other bonds – environmentally sustainable, sustainability-linked bonds
  • require issuers to publish transition plans that are compatible with EU climate goals
  • align with the EU Taxonomy on the use of proceeds
  • require a positive audit opinion by an auditor on the alignment of the transition plans before issuing an EU green bond or sustainability linked bond
  • require post-issuance external review of allocation report after the full allocation of proceeds, but introduce an optional external review requirement for the impact report
  • consider assessment activities as non-audit service under Art 5 para 1 of Audit Regulation
  • introduce a civil liability clause for issuers whose failure to comply leads to the depreciation of green bond

Read more

MEPs to object the EU Taxonomy Complementary Delegated Act

MEPs from Christian Democrats, Social & Democrats, Liberals, Greens and the Left groups tabled a draft motion for a resolution objecting the EC’s complementary Delegated Act (DA). The DA proposes including nuclear energy and fossil gas in the EU taxonomy to be considered as transitional activities. The DA has received strong criticism since its adoption by the EC in February. The ECON Committee and Environment, Public Health and Food Safety (ENVI) Committee are expected to vote on the motion for a resolution on 14 June. The EP will have to vote on this at the plenary in July.

Ahead of the vote, the EP’s ECON and ENVI Committees held a public hearing on the Taxonomy DA. Read more

EC responds to ESAs queries on the SFDR

The European Supervisory Authorities (ESAs) submitted questions to the EC asking for clarification on the Sustainable Finance Disclosure Regulation (SFRD) and the Taxonomy Regulation’s interpretation. Specifically, ESAs asked to clarify the:

  • principle adverse impact disclosures
  • financial advisers
  • good governance
  • scope of the Taxonomy Art 5-6

Read the EC’s response

EFRAG continues its work and starts outreach on ESRS

The European Financial Reporting Advisory Group (EFRAG) published the Basis for conclusions (BfC) for the European Sustainability Reporting Standards (ESRS) Exposure Drafts (EDs). The BfC accompanies the EDs and provide the objective and context of the ESRS.

As part of the ESRS public consultation, EFRAG is organising five outreach events with national organisations and 13 educational sessions to inform about the proposals. The links to follow these events online and access the respective recordings are available in EFRAG’s website.

In addition, EFRAG invited preparers to test the proposed requirements in the ESRS EDs. The questionnaire contains modules on the elements of ESRS and should be delivered to EFRAG on 30 June.

EFRAG extended the deadline of its call for tenders for assistance on the cost-benefit analysis of the first set of ESRS from 28 April 28 to 27 May. The ESRS cost-benefit analysis is a part of the Technical Advice on ESRS that EFRAG will deliver to the EC.

Lastly, EFRAG launched a public call for tenders for assisting in analysing the feedback from its public consultations on draft ESRS and delivering the report by 9 September. The applications deadline is 27 June.

EFRAG calls for candidates to enhance its sustainability reporting pillars

EFRAG opened two new seats for the Sustainability Reporting TEG for members with expertise on SME and social topics. The application deadline is June 20. In addition, EFRAG launched a call for experts to participate in sector workshops and to provide input on the preparation of draft ESRS Sector-Specific standards. The application deadline for each workshop is 10 calendar days before the workshop takes place.

Due diligence should be a positive measure and not a means of punishment, says BusinessEurope

BusinessEurope published a position paper on the EC proposal for a Corporate Sustainability Due Diligence Directive (CSDDD). They raise several concerns and propose suggestions for improvements. Read more

IFRS Foundation Trustees appoint four additional members to the ISSB

The International Financial Reporting Standards (IFRS) Foundation Trustees announced the appointment of four inaugural members of the International Sustainability Standards Board (ISSB): Richard Barker, Verity Chegar, Bing Leng and Niddi Nnoli-Edozien. The new appointees come from different geographic areas and will join as full-time ISSB members in July 2022. The IFRS Foundation will announce the appointment of two more members to reach quorum shortly and aims to complete the ISSB inaugural appointments by the third quarter of 2022.

Read more

US SEC extends its comment period for the Climate-related Disclosure Rules Proposal

The US Securities and Exchanges Commission (SEC) extended the comment period to 17 June (originally 20 May) to give stakeholders more time to analyse and prepare their response comments.

Read more

ISSB progresses its standard-setting work

The ISSB outlined the actions which in its view are required to deliver a global baseline for sustainability disclosures by the end of 2022.

The G7 Finance Ministers and Central Bank Governors welcomed the ISSB’s efforts and noted that the baseline should be practical, flexible, proportionate and ultimately suitable for SMEs too.

The ISSB’s Jurisdictional Working Group held their first meeting and discussed taking further steps to build a global baseline of sustainability reporting. Relevant institutions from China, Europe, Japan, UK and US participated in the meeting, with the International Organization of Securities Commissions (IOSCO) as an observer. China, Japan and the UK pointed out that they have taken actions to form views on adopting or transitioning to ISSB standards.

The future path of the Integrated Reporting under IFRS

Upon the consolidation of the Value Reporting Foundation in the IFRS structures, the Integrated Reporting Framework will become the responsibility of both the International Accounting Standards Board  (IASB) and the ISSB. The Framework will become part of the IFRS Foundation materials and will initially be positioned as a voluntary resource.

Read more

IFRS takes first steps to develop a taxonomy for ISSB Standards

The IFRS staff has launched a request for feedback on the future IFRS Sustainability Disclosure Taxonomy. The deadline for responding to this request is 30 September.

Read more

Common Ground Taxonomy

The International Platform on Sustainable Finance updated the Common Ground Taxonomy (CGT) activities’ table based on latest feedback from stakeholders. The updated CGT includes 72 overlapping climate mitigation activities of China and the EU’s taxonomies for the substantial contribution criteria.

Read moreThis curated content was brought to you by Vita Ramanauskaité, Accountancy Europe senior policy advisor since 2015. You can send her tips by email, follow her on Twitter and connect with her on LinkedIn.