Date: 9th August 2022

BETTER FINANCE published a letter accompanying its response to the European Financial Reporting Advisory Group (EFRAG) on its draft EU Sustainability Reporting Standards (ESRS).

In light of the proposals put forward by EFRAG, BETTER FINANCE would like to draw attention to the overarching themes that will ensure investors receive understandable, comparable, and reliable information which will enable them to make informed opinions and decisions about the impact and risks on current and potential investments.

  • Clarity & Intelligibility. First, BETTER FINANCE wishes to remind that EU Law rightly requires information provided to “individual” investors to be CLEAR, i.e. “presented in a way that is likely to be understood by, the average member of the group to whom it is directed, or by whom it is likely to be received[1]. Thus, EFRAG should consider reviewing the wording of the draft standards to this aim or at least add ‘plain language’ summaries making these standards actually accessible for EU citizens as end users.
  • Consistency, comparability and coordination with other disclosure standards and initiatives such as the International Sustainability Standards Board (ISSB)[2], the Sustainability Accounting Standards Board (SASB)[3] , the Global Reporting Initiative (GRI)[4], and the Task Force on Climate-Related Financial Disclosures (TCFD)[5] can ensure a set of internationally accepted high-quality sustainability reporting standards, which provide comparable and consistent information for “individual” investors. We encourage EFRAG to work closely with the ISSB, SASB and other international initiatives in order to provide a consistent non-financial reporting landscape for investors and other stakeholders alike. In particular, US-domiciled listed equities account for about 60% of the World’s total equity markets, and EU citizens as pension savers and investors are therefore largely directly or indirectly exposed to those.
  • Integrating sustainability and financial reporting is key for investors as is access to appropriate data. A single - integrated - management report would ensure that all information is based on the same requirements with respect to precision, quality and comparability and thus improve the decision-making processes of “individual” investors. The consistency should also apply to accounting and financial reporting standards as well as audit standards, assurance and independence of external statutory auditors.
  • Double materiality concept requires a clear and standardised methodology. The guidance in the ESRS is rather high-level and directional, leaving undertakings with a lot of margins on deciding on the materiality of their positive and negative impacts on society or the environment. Ensuring that the materiality concept is uniformly understood amongst users and preparers, BETTER FINANCE proposes to provide clear and detailed guidance on how to perform the materiality assessments. This will provide greater clarity around the concept and how to apply it in practice. Without clear process guidance, it will be difficult for undertakings to comply with the ESRS, may lead to inconsistent application and subsequently impact the quality of information for investors.
  • Adequate environmental, social and governance standards are essential tenets of sustainable development for investors as well as undertakings. The ESRS should include clear requirements for the disclosure of climate transition plans (both with regard to mid and long-term targets) to provide clarity and support the avoidance of greenwashing. Despite the fact that there is not yet a Social Taxonomy in place on which ESRS could build, the social standards cover a wide range of topics. We consider that further guidance is needed to ensure high-quality reporting for investors. Equally, understanding the governance of a company is crucial for investors and other stakeholders as undertakings cannot be sustainable without good corporate governance. It also provides the basis upon which sustainability activities are built and evaluated. Strong corporate governance indicates strong corporate culture, which in turn signals robust long-term resilience. The ESRS should provide further guidance to enhance transparency and participation in decision-making processes. In particular, the compliance of undertakings (especially listed ones) with the exercise of shareholders' rights and engagement should be part of the ESRS. In that context, we are concerned that the G1 standard may be subject to revisions, because of amendments to the final version of Article 29b (2) (c) (i) CSRD.

| Read the full letter below. |

[1] Commission Delegated REGULATION 2017(565) Article 44, Fair, clear and not misleading information requirements (Article 24(3) of Directive 2014/65/EU), 2. (d)
[2] The International Sustainability Standards Board (ISSB) was created following COP26 in 2021 with the aim of developing a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.
[3] The Sustainability Accounting Standards Board (SASB) – the US standard provider - focus on ESG issues expected to have a financially material impact on the company, aimed at serving the needs of most investors and other providers of financial capital, About Us – SASB
[4] The Global Reporting Initiative (GRI) created by representatives from the UN, investor agencies, corporations, practitioners, and civil society groups, provides the world’s most widely used standards for sustainability reporting, GRI - Home (
[5] The Task Force on Climate-Related Financial Disclosures (TCFD) was created in 2015 by the Financial Stability Board (FSB) to develop consistent climate-related financial risk disclosures for use by companies, banks, and investors in providing information to stakeholders, Task Force on Climate-Related Financial Disclosures | TCFD) ( Its membership does not include any organization representing “retail” investors.