50,000 European companies subject to extra-financial reporting (CSRD) in 2025
Over the next few years, the implementation of sustainable finance legislation will be a major project for the investment sector. Many complex regulatory concepts will impact all stakeholders: companies, asset managers, distributors and end clients. The next three main items on the sustainable regulation agenda are:
- August 2022 – MIF 2[1]: the update of directive on Markets in Financial Instruments entered into force on 2 August. Distributors of financial products must now determine their clients’ sustainability preferences using a questionnaire covering three main categories: desired proportion of sustainable investments, the share of investments aligned with the EU taxonomy and consideration of the main negative effects.
- January 2023 – SFDR level 2[2]: after several postponements, the implementation of the second part of the SFDR regulation on 1 January 2023 will increase the periodic communication of management companies on Article 8 and Article 9 funds, providing details on the main adverse impacts of these funds in terms of sustainability (PASI).
- Spring 2025 – CSRD[3]: this imposes extra-financial reporting requirements on European companies, who will have to publish their environmental, social and governance data in a complete and specific manner annually. Almost 50,000 companies will be impacted, considerably broadening the scope of the previous NFRD[4] directive that impacted 12,000 companies. At the same time, the EFRAG (European Financial Reporting Advisory Group), at the European level, and the ISSB (International Sustainability Standards Board), at the global level, are preparing non-financial accounting standards which will facilitate the standardisation of these publications.
Patrick Simion, Chief of Staff and Head of Public Affairs at BNP Paribas Asset Management
“These three pieces of regulation form a powerful framework that should make it possible to accelerate the re-allocation of capital towards the financing of sustainable activities. Power is being given back to savers, which will increase demand, while the transparency of supply is being enhanced. At this stage, one major challenge is the regulatory timeline, with the key source of information – extra-financial disclosure by issuers – the last piece of the jigsaw. Nonetheless, we are confident that the various regulations will bring a product offering that better meets customer demand and increases funding for the ecological transition.”