EU looks to address ESG data gaps

November 26, 2021

The European Union is preparing a "single access point" for financial and sustainability data, according to leaked documents.

It has been reported that the EU wants to give investors "seamless access" to data through the creation of a European Single Access Point (ESAP). Legislation is set to be unveiled in the coming weeks.

The ESAP will be set up by the EU's financial regulator, the European Securities and Markets Authority (ESMA), by December 2024, according to a leaked copy of the draft legislation, seen by Responsible Investor. The ESAP is designed to provide EU-wide access to sustainability information reported by companies, along with other financial data.

Inconsistent and inaccurate sustainability data has long been an issue for investors, with a multitude of data and ratings providers all competing to analyse and disseminate the information to investors.

The International Organization of Securities Commissions (IOSCO) has called for these providers to be given more attention by national regulators due to their crucial role in sustainable finance.

ESMA will be permitted to charge fees to users that need "very large volumes of data or frequently updated information", according to the draft legislation. This is aimed at reducing the impact of significant demand on the regulator. The EU itself and other national regulatory bodies will have free access to the ESAP, Responsible Investor reported.

The new rules form part of the EU's Corporate Sustainability Reporting Directive (CSRD) and will only apply to larger companies. Smaller companies will be encouraged to provide sustainability information to the ESAP on a voluntary basis.

The European Financial Advisory Group (EFRAG) is also working on reporting standards for the CSRD. This week it published an update on its work, saying it had met with people working on the CSRD several times in recent months to discuss compatibility.

Other databases are also being developed in the UK and international body the Network for Greening the Financial System. The latter is aimed specifically at providing banks with data related to climate and biodiversity issues.