Inter­na­tio­nal Finan­cial and ESG Report­ing, Com­pa­ny and Asset-Valuations

Sin­ce 2020, the deve­lo­p­ment of a glo­bal­ly accept­ed report­ing stan­dard for ESG (Envi­ron­ment, Social, Gover­nan­ce) metrics and infor­ma­ti­on has gai­ned mas­si­ve momen­tum world­wi­de. This goes hand in hand with the inte­gra­ti­on of this infor­ma­ti­on into exis­ting finan­cial report­ing or the manage­ment report on the one hand and obli­ga­to­ry assu­rance requi­re­ments on the other.
In the fall of 2020, the World Eco­no­mic Forum adopted a list of 56 so-cal­led Stake­hol­der Capi­ta­lism Metrics, which had been taken from various pre­vious stan­dards, com­bi­ned with the announce­ment by around 60 glo­bal cor­po­ra­ti­ons that they would report the­se as soon as possible.
In Decem­ber 2020, 5 glo­bal­ly reco­gni­zed orga­niza­ti­ons (Group of 5 — CDP, CDSB, GRI, IIRC, SASB), with the invol­vement of IOSCO, adopted a Memo­ran­dum of Under­stan­ding to work tog­e­ther to deve­lop a sin­gle “glo­bal­ly accept­ed com­pre­hen­si­ve cor­po­ra­te report­ing sys­tem … for sus­taina­bi­li­ty-rela­ted finan­cial disclosure”.
The actu­al orga­niza­tio­nal imple­men­ta­ti­on within the frame­work of a struc­tu­red due pro­cess was assi­gned to the IFRS Foun­da­ti­on by con­sen­sus of all the abo­ve-men­tio­ned organizations.

In April 2021, the Euro­pean Com­mis­si­on adopted the draft of a revi­sed CSR Direc­ti­ve to ensu­re grea­ter trans­pa­ren­cy of mate­ri­al ESG aspects and to place so-cal­led “non-finan­cial report­ing” on an equal foo­ting with finan­cial reporting.
The EU Com­mis­si­on is thus a glo­bal pio­neer for man­da­to­ry com­pre­hen­si­ve sus­taina­bi­li­ty report­ing in accordance with the EU’s own spe­ci­fi­ca­ti­ons with a con­cre­te road­map and clear respon­si­bi­li­ties with regard to the pre­pa­ra­ti­on, moni­to­ring and audi­ting of this reporting.
In this way, the EU is aiming for har­mo­niza­ti­on with the ongo­ing regu­la­ti­ons in the cour­se of the Action Plan on Sus­tainable Finan­ce and the EU Green Deal. The man­da­to­ry report­ing in the manage­ment report will take effect by means of the EU’s own legal acts and will direct­ly include pro­vi­si­on in a digi­tal for­mat based on an EU taxo­no­my adopted for this pur­po­se as well as an exter­nal assu­rance requi­re­ment of incre­asing quality.

The­se mea­su­res, both in the EU and at the glo­bal level, will result as can be seen in depths in new report­ing requi­re­ments, not only for publicly traded com­pa­nies, but also at first for lar­ger com­pa­nies (EU — 250 employees or more) plus indi­rect­ly for all com­pa­nies, regard­less of their size.
From a fac­tu­al point of view, the direct and indi­rect effects of this deve­lo­p­ment will have a signi­fi­cant impact on finan­cial figu­res and report­ing on the one hand and on valua­tions of com­pa­nies and assets on the other.

In 2021, the Euro­pean Com­mis­si­on adopted a draft CSR Direc­ti­ve as a sup­ple­ment and exten­si­on of the exis­ting Non-Finan­cial Report­ing Direc­ti­ve. As a new aspect a ‘limi­t­ed assu­rance’ is man­da­to­ry for the repor­ted sus­taina­bi­li­ty infor­ma­ti­on and that the­re is also an opti­on to extend this to a ‘reasonable assu­rance’ at a later date.

Inde­pen­dent pro­vi­ders of audi­ting ser­vices bey­ond the sta­tu­to­ry audi­tors will then also be aut­ho­ri­zed for this pur­po­se, in order to offer com­pa­nies with assu­rance obli­ga­ti­ons a broa­der sel­ec­tion of pro­vi­ders of audi­ting ser­vices for sus­taina­bi­li­ty reports.

The Euro­pean Com­mis­si­on’s draft CSR Direc­ti­ve requi­res the imme­dia­te pro­vi­si­on of repor­ta­ble infor­ma­ti­on in machi­ne-rea­da­ble, i.e. digi­tal form, so that it can be fed into the ‘Euro­pean Sin­gle Access Point’, which is to be set up as part of the Capi­tal Mar­kets Uni­on action plan.

The infor­ma­ti­on to be pro­vi­ded must be based on the EU taxo­no­my for sus­taina­bi­li­ty reports.