Europe’s executive arm is proposing a two-year delay in implementing a key element of its sustainable finance framework, as complaints mount that businesses can’t keep up.
(Bloomberg) — Europe’s executive arm is proposing a two-year delay in implementing a key element of its sustainable finance framework, as complaints mount that businesses can’t keep up.
The European Commission said cutting red tape is critical to ensuring that the region’s companies remain competitive, according to a document laying out its agenda for 2024. That means extending the deadline for adoption of sectoral elements of the European Sustainability Reporting Standards, or ESRS, currently due to come into force in June.
“This will provide an immediate reduction in the reporting burden for in-scope companies,” small and medium-sized firms, the commission said.
The development is the latest sign of a pushback against Europe’s ambitions to swiftly respond to climate change and social inequality, and steer its economy toward a more sustainable model. An 11th-hour attempt by members of the EU’s parliament to entirely rework the ESRS failed Wednesday, in a vote of 359-261.
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Other corners of Europe’s ESG framework also are likely to be reworked. The commission is reviewing the Sustainable Finance Disclosure Regulation, its ESG investing rulebook. And this week, the EU announced it’s seeking stakeholder input as it reconsiders Europe’s taxonomy of sustainable business activities amid a steady drumbeat of complaints that companies can’t meet all the new rules within existing deadlines.
The European Financial Reporting Advisory Group (EFRAG), which develops the reporting standards, said in a report earlier this month that it’s preparing to provide guidance for the “numerous questions” it anticipates about the general sustainability reporting requirements that companies will have to comply with.
While sector-specific reporting guidelines may be delayed, EFRAG said it still expects to complete reporting guidelines for banking, insurance and the capital markets in 2024. The three industries are considered to be a priority for EFRAG because of the role they play in reaching sustainable finance policy goals.
The commission has pledged to reduce reporting requirements by about 25%, and said it will cooperate with the European Parliament and the Council “to ensure all forthcoming proposals take into account the need to reduce burdens while preserving their policy objectives.”
(Updates to add timeline for financial sector in seventh paragraph.)
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