Login Newsletter Membership About us Search

CSRD implementation removes GP hurdle

by Silvia Saccardi 9 December 2022

The European Council’s approval of the Corporate Sustainability Reporting Directive (CSRD) on 28 November has reduced the burden upon GPs to solicit sustainability data from portfolio companies.

Other advantages of streamlining the reporting standards include more transparency and more assistance for financial market participants who are in scope of the EU’s SFDR and taxonomy legislation.

A broader horizon

The CSRD is an updated version of the Non-Financial Reporting Directive (NFRD) and applies to a broader scope of undertakings. These will now include:

  • Entities with securities listed on EU regulated markets;
  • Listed or unlisted undertakings meeting at least two of the following (this applies to EU undertakings and EU subsidiaries of a non-EU entity):
    • >250 employees
    • > €40m turnover
    • > €20m total assets
  • SMEs with transferable securities on an EU-regulated market from 1 January 2026. Entities may opt out until 2028.

It is worth noting that UK entities are not automatically included in the scope of the legislation post-Brexit. However, it is predicted that similar legislation will be implemented in the UK in due course, with a commitment to mirror the EU’s taxonomy.

There is also an equivalence regime in place whereby certain non-EU disclosure requirements can be recognised as complying with CSRD. While this equivalence is not yet measurable and there is no guarantee that the equivalence will be granted to non-EU companies, it does incentivize an alignment between regulations which are developed elsewhere.

The ins and outs

Additional requirements to the former NFRD include the “double materiality” concept, which measures both incoming and outgoing sustainability impacts. Incoming factors should be measured using the environmental and social determiners that can affect the entity itself, while outgoing factors are measurable using the activities which have the potential to affect the environment and wider society.

Another addition, which was optional in the NFRD, is the obligation of audit assurance requirements. This means that reported sustainability information provided by companies will be audited accordingly to prevent greenwashing. This can be performed by assurance service providers. For now, this requirement will be limited until 2026 when the EU will tighten its surveillance prerequisites.

More information on ESG regulation and its history in the UK and EU can be found here.

Subscribe today to continue reading

Login Become a Member Request a trial

24 March 2023

Mean green litigation machine

ESG jurisprudence continues to develop as BNP Paribas first private player to be hit with lawsuit

23 March 2023

Invest Europe releases first ESG KPI report

The report is part of a wider initiative to keep track of and analyse ESG trends within the industry

23 March 2023

Accelex launches document management platform

Company aims to provide actionable accounting data and investment insights

23 March 2023

Partech welcomes chief sustainability officer

Josépha Montana joins from Turenne Capital in the newly created role

23 March 2023

Dechert expands fund formation practice

Formerly head of Travers Smith’s investment funds group, Sam Kay is leaving the firm after 25 years

23 March 2023

Profile: Brian Mason, BC Partners

The head of technology discusses the human side of tech and its role in decision making