High quality data, double materiality, assurance and TCFD | EFFAS

The implementation of CSRD and the creation of a sustainability reporting regime for companies will have an important impact on the availabilty of solid ESG data. As a delegated act the reporting regime will be applicable throughout Europe from the start. The reporting will be based on standards developed by EFRAG.The provision of high-quality data will be at the heart of the issue as outlined by Patrick de Cambourg, Member of the EFRAG Board and Chair of the Project Task Force in a discussion at the CESG conference of EFFAS (The European Federation of Financial Analysts Societies) in Vienna, moderated by Jean Philippe Desmartin, Head of Responsible Investment at Edmond de Rothschild and co-chair of the EFFAS CESG.Fritz Mostböck, Head of Group Research Erste Group Bank AG and EFFAS Deputy Chairman: "We established CESG, the Commission on ESG ten years ago and EFFAS was successful in making ESG a mainstream topic. The CESGA (Certified ESG Analyst) is a comprehensive programme structured in 9 modules and we are proud to say that 3.400 analysts graduated in Europe but also in Asia and in the U.S."Double materiality as key differentiatorMarket participants are looking for standardisation and global harmonisation of reporting standards. One key cornerstone of EU's regulatory framework will be the concept of double materiality. This might continue to be the main differentiator among different reporting regimes and this is confirmed over and over again by representatives of European institutions.Hyper Inflation of Reporting?Patrick de Cambourg assured delegates at the CESG/EFFAS conference that there will be no risk of exploding reporting requirements as only "material" risks, impacts, exposures and information will have to be reported by companies. The relevance of data for different recipients will also be considered. A concept of multi-tagging of information will be a solution to manage the requirements for different reporting regimes (EFAG/ESRS, ISSB, SEC, ...).TCFD is relevant for all reporting frameworksAlthough reporting standards might differ depending on the objective and target audience of the information the TCFD umbrella is relevant for all frameworks. Climate is important and for many market participants the key area. But critics also point out that even for the most important datapoints like Scope 1,2 and 3 GHG emissions there are still concerns about methodologies and data quality.Work in progress ... All standard setters agree that more work needs to be done. The recent EFRAG consultation was "neither a blessing, nor a rejection", as quoted by EFRAG representatives. A lot was achieved over the past few months and there is a tight deadline until the elaborated draft standards will be finalized by November 2022. ISSB was set up within a short period of time and there is also work ahead on their side.Phase-in implementationOnce standards are approved and implementation starts in 2024 there might be different phase-in periods for different company sizes and groups.Assurance to ensure qualityData quality will be key for European regulators and therefore assurance will continue to be a key element. Starting with limited assurance and then reasonable assurance will ensure high-quality audited data and processes.This meets the requirement of market participants like fund managers and analysts who prefer to rely on a smaller dataset of third party audited data compared to a large universe of low quality data. Fund managers are also less interested in third party ratings but more in the raw data to develop their own assessments and "do their homework". All opinions expressed are those of the author. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.