The European Commission’s head of sustainability disclosures has reassured investors that they will have access to sufficient information under upcoming corporate reporting requirements.
Investor groups welcomed the adoption last year of the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS), which will require Europe’s largest companies to provide information about their sustainability performance starting next year.
However, they also expressed concern that the Commission’s decision to subject all issue-specific reporting to a so-called ‘materiality assessment’ might not guarantee investors access to the information they need for capital allocation and/or to meet their own reporting obligations.
Speaking at IPE’s recent Transition conference in Brussels, Sven Gentner, head of unit for corporate reporting, audit and credit rating agencies at the European Commission, acknowledged concerns about the impact of the decision, but said he did not foresee it leading to problems for investors.
“If you look at the requirements around the materiality assessment, and when you look at what EFRAG has already published in terms of guidance, I really doubt that there will be companies who have anything material that would be of interest to investors that will not report on this,” he said, referring to the advisory body that steers the development of ESRS.
“It’s actually a fairly rigid process you have to go through”
Sven Gentner, the European Commission’s head of corporate sustainability disclosures
Under the CSRD, companies must carry out materiality assessments to identify the environmental and social issues on which they should provide information to the market. This is both from the perspective of the company’s impact on those areas, and how those issues could affect a company’s business performance.
Except for climate change, corporates are not required to disclose the reasons justifying why they deemed a sustainability topic as not material.
EFRAG has provided guidance on the materiality assessments, but firms are given discretion to decide the threshold for what qualifies as ‘material’. The European Securities and Markets Authority (ESMA), the financial markets watchdog, recently said that full transparency of the materiality assessment process was required “irrespective of the materiality of the specific topics”.
Speaking on the panel, Gentner said: “Materiality assessment does not mean it’s now voluntary for you to decide whether you report or not.”
“It’s actually a fairly rigid process you have to go through, so I’m not really very concerned that in the end, the asset managers and other investors of this world will be faced with the situation that they don’t get the information that they need in turn under the legal framework that concerns them.”
Gentner also said the Commission was sensitive to concerns about CSRD being too burdensome for corporates, and was planning to shortly publish an FAQ document to help them prepare.
“We’re trying very hard to send a message to say that it’s important the legal framework is respected, but that within this framework we think there is quite a bit of room for [flexibility or transition measures],” he said.
Citing the postponement of sector-specific standards to June 2026, Nicolas Jeanmart, head of personal and general insurance at Insurance Europe, said it was encouraging that there was a recognition that companies need time to implement the new sustainability reporting requirements.
“That could be seen as contradicting the objective of reducing emissions as quickly as possible, but the reality is there is a need for time,” he said on the panel.
The conference took place shortly after the European elections, which saw centrist groups hold their ground despite some gains for right-wing nationalist populist parties.
Since then, the EPP, which is Ursula von der Leyen’s party, has reportedly said it wants to “halt implementation” of reporting requirements within the CSRD, but this may need to be seen as a negotiating tactic to influence the next Commission’s mandate.
Von der Leyen has been selected for a second term as head of the European Commission, although she still needs to be approved by the European Parliament.
On the day of its Transition conference, IPE reported that Martin Spolc, one of the key architects of Europe’s sustainable finance agenda, was being replaced by Didier Millerot as head of sustainable finance at the European Commission.
SFDR assessment
Days earlier the European Supervisory Authorities came out with their ideas for the future of the EU’s flagship sustainable finance disclosures regulation (SFDR), with panellists sharing reflections on the watchdogs’ report.
Gentner would not be drawn on the next Commission’s steps with regard to the SFDR, but said that what the financial industry and EU lawmakers had achieved over the last few years was “quite remarkable”.
He also said that it was now important to consider the sustainable finance framework in conjunction with sectoral rules the EU was establishing, such as green building codes or bans on internal combustion engines.
“At some point we need to ask: are we actually on the right track now to achieve this or not?,” Gentner said. “But that’s for someone at a much higher level to do that assessment and come to a conclusion.”
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