News 10/12/24

CSRD enhances sustainability information beyond annual reporting

As of the 2024 financial year, large publicly listed companies with more than 500 employees will be covered by the new reporting requirements of the Corporate Sustainability Reporting Directive (CSRD), leading to enhanced transparency in annual corporate reporting. Next to these improvements, the CSRD also impacts the sustainability information contained in prospectuses. The increased reporting requirements enhance the availability of information, creating an opportunity for the inclusion of more substantial sustainability-related information. These findings are set out in the 12th edition of the AFM Market Watch.

In short

CSRD improves sustainability information, which is important to investment decisions
Focus points: reliability, comprehensibility and consistency of sustainability information
Implementing new sustainability requirements is a journey

CSRD improves sustainability information, which is important to investment decisions

The CSRD introduces stricter transparency requirements for sustainability information in annual reports. This also impacts the inclusion of sustainability information in prospectuses as it seems to result in a lower materiality threshold for including sustainability information in the prospectus. The AFM’s recent thematic reviews into double materiality, net-zero targets and the AFM’s Consumer Monitor also show the importance of sustainability related information in investment decisions.

The CSRD does not only enhance the sustainability information in corporate annual reporting and prospectuses, but it also affects other documents, including press releases. An analysis of the inside information press releases that were filed to the AFM shows that approximately 36% of the press releases contains ESG related information.

Focus points: reliability, comprehensibility and consistency of sustainability information

Market participants fulfil an important role in transitioning to a sustainable society by ensuring the availability and quality of sustainability information. Key focus points include the reliability, comprehensibility, and consistency of CSRD-related data, which must be clearly presented and substantiated. Issuers are responsible for including all material sustainability information in their annual corporate reporting and prospectuses, also ensuring alignment between these, and obtaining auditor assurance for their sustainability statement.

Implementing new sustainability requirements is a journey

The AFM recognizes the challenges companies face in implementing new regulations such as the CSRD and the EU Green Bond Regulation. Acknowledging the complexity and transitional relief measures, the AFM encourages progress over perfection in the initial stages. However, the AFM reminds issuers of their obligation to provide a sustainability report that addresses key material topics as a minimum requirement and for providing a prospectus which contains the material sustainability information for investors, and if there are clear violations, the AFM will act. For example, if a company is “greenwashing”, or if it is clearly intentionally failing to comply with the CSRD requirements.

AFM Market Watch

The AFM Market Watch is a newsletter published on a regular basis that covers current capital market developments and topics in an in-depth way. The AFM Market Watch newsletter covers capital market-related topics such as MAR, MiFID II and transaction reporting. With the AFM Market Watch we will express observations and findings on current, capital market-related developments by using data analyses.