CSRD Reports: Finance Sector Outshines Others in Sustainability Impact

• The first reports submitted under the new CSRD regulations say the finance sector is performing better than other sectors in sustainability.
• Financial institutions remain largely silent on environmental issues but place more emphasis on social and governance matters.
• Analysts say it is too early to conclude, as companies are still getting used to the new rules.

The finance sector stakes its claim to having a more positive impact on sustainability than others under the European Union's (EU) new Corporate Sustainability Reporting Directive (CSRD), according to an analysis of over 300 reports under the new CSRD regime.

The new law, which came into effect in 2024, requires larger companies in the EU to publicly disclose how their operations impact people and the planet. They must include in their disclosures any risks, opportunities, and impacts (known as IROs) related to sustainability issues.

Over 300 reports analysed reveal that banks, asset managers, and insurers reported more positive impacts than businesses in other sectors, such as healthcare and renewable energy.

READ MORE: EU to Expressly Set Out Sustainability Reporting Rules by October

Having dwelt at length on the reports, the analysts were completely surprised to find that 32% of the finance sector's IROs were logged as positive; meanwhile, its counterparts, healthcare and renewable energy, reported 21% and 24%, respectively. They had expected the other sectors to perform better than the finance sector.

Incidentally, most businesses reported more negative than positive impacts. Datamaran, the sustainability data specialist who conducted the analysis, says that negative impacts comprised 37% of the IROs, compared to merely 13% opportunities identified. This shows that many companies are still struggling to operate sustainably, or not doing so at all, and lack understanding of how to factor sustainability metrics into their operations.

The finance sector, in reports submitted, highlights internal policies and relationships. For example, how they treat employees, govern themselves, as well as engage with communities and clients. However, the analysts said the sector does not really focus on environmental issues, even though financial institutions speak highly of climate change and biodiversity.

ALSO READ: EU Weighs Omnibus Proposal, Insurers Left Out of CSRD: Report

Eventually, experts say these reports may not be accurate, as organisations are still getting used to the new reporting regime, and there is room for improvement in how they work towards decarbonisation and sustainability goals.

Ends/

Are you looking for sustainability experts to guide your business? Explore our ESG Marketplace, featuring over 700 providers offering a wide choice of sustainable advisory services.

Follow our Regulator News for regular news and views.

Check out our latest ESG Event updates

Source: IPE