ESMA comments on the draft ESRS

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08 Aug, 2022

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has commented on the draft European Sustainability Reporting Standards (ESRS) developed by the European Financial Reporting Advisory Group (EFRAG).

ESMA highlights its support for a strong materiality assessment but expresses its concern with the suggested ‘rebuttable presumption’ approach. ESMA also encourages EFRAG to keep engaging with the International Sustainability Standards Board (ISSB) to ensure further alignment of the ESRS and the IFRS Sustainability Standards to benefit both users of sustainability reporting and the companies that prepare the reporting. The letter notes:

[W]hile both EFRAG and the ISSB built on the TCFD structure, EFRAG has decided to depart from it and develop a more complex architecture. If this architecture is retained, the reconciliation between ISSB standards and the ESRS will not be seamless which may be to the disadvantage of users and preparers. ESMA encourages EFRAG to undertake the necessary work to minimise the differences in architecture while recognising the fact that the TCFD structure was originally developed for financially material information on climate- related issues and that it may, therefore, need adaptations to reflect the European specificities.

Please click to access the full comment letter on the ESMA website.

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