ESAs respond to stakeholder feedback with Inline XBRL for SFDR

Posted on December 10, 2023 by Editor

The three European Supervisory Authorities (ESAs) – EBA, EIOPA, and ESMA – have issued key amendments to the draft Regulatory Technical Standards (RTS) that complement the EU’s Sustainable Finance Disclosure Regulation (SFDR). These adjustments are aimed at fortifying the existing SFDR framework and responding to the evolving landscape of sustainable finance.

The proposed changes encompass various dimensions, including the introduction of new social indicators, a streamlined disclosure framework for principal adverse impacts on the environment and society, and additional disclosures related to “greenhouse gas emissions reduction” targets.

Most interesting for us, however, is the update that requires machine readability – namely, markup in Inline XBRL – for disclosures. The ESAs have taken into account the responses from stakeholders, of whom a substantial majority expressed support for machine-readable SFDR disclosures. Many stakeholders specifically recommended Inline XBRL to meet the format requirements, ensuring that disclosures cater to both human and automated processing needs.

Recognising the importance of aligning with the forthcoming European Single Access Point (ESAP) Regulation, the ESAs propose that the disclosures made available on ESAP should be presented in a format that is both human-readable and machine-readable, specifically Inline XBRL – a move which will affect all disclosures covered by SFDR. This approach aligns with sustainability reporting requirements under the Corporate Sustainability Reporting Directive (CSRD), fostering consistency and ease of interpretation.

This decision aims to strike a balance, making sustainability disclosures accessible and interpretable for a diverse range of stakeholders, including regulatory bodies, investors, and the wider public. We’re pleased to see the ESAs taking on valuable feedback to increase the transparency and utility of these disclosures!

Next up, the European Commission will study the draft RTS and decide whether to endorse them within three months of publication by the ESAs. The draft RTS would be applied independently of the comprehensive assessment of SFDR announced by the European Commission in September 2023 and before changes resulting from that assessment would be introduced.

For more detailed information on the proposed amendments, read the report here.

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