European Banking Authority warns European Commission that permanent reliefs in amended European Sustainability Reporting Standards could reduce quantitative disclosures

The European Banking Authority published an Opinion to the European Commission on the draft amended European Sustainability Reporting Standards (ESRS) developed by the European Financial Reporting Advisory Group (EFRAG). It supports the overall simplification approach aimed at reducing reporting compliance costs, but highlights concerns about the proposed reliefs, particularly where they are permanent, and recommends time limits for alleviations in several areas. The Opinion cautions that the cumulative effect of the relief package could significantly reduce the amount of quantitative information reported by undertakings, potentially conflicting with the Commission’s stated objective to prioritise quantitative data and shifting the burden onto users of disclosures, including banks. It also notes that undertakings within scope of the revised Corporate Sustainability Reporting Directive (CSRD) are typically large and should be capable of meeting the requirements, and warns that open-ended reliefs may undermine interoperability with international sustainability standards and prompt financial institutions to seek information bilaterally from counterparties for risk management. The European Commission is expected to consider the issues raised by the EBA, alongside opinions requested from the European Securities and Markets Authority, the European Insurance and Occupational Pensions Authority, and the European Central Bank, before adopting the amended draft ESRS.