From 2025 onward, large “public interest” companies with 500 employees or more and with EU-regulated market-listed securities will need to report on CSRD requirements for the current financial year. These are the companies that already had an existing obligation under the Non-Financial Reporting Directive (NFRD). All other companies will gradually be added between 2025 and 2028. The CSRD requires reporting under a double materiality perspective with an increased focus on targets and forward-looking information. CSRD companies are also subject to taxonomy-related disclosures. For more details about the impact of the CSRD rules, please refer to our dedicated report “CSRD: preparing for a deluge of sustainability disclosures”.
The US federal-level climate disclosure requirements are expected to be final in 2024 and effective as of 2026. The Securities and Exchange Commission (SEC) will hold public companies to a higher standard of climate data transparency, likely facilitating a smoother development of the US sustainable finance market. California’s two newly signed climate-related laws require over 5,000 large public and private companies to disclose Scope 1-3 emissions data and over 10,000 companies to report on climate-related financial risks. Despite challenges facing California’s regulatory agencies on implementation, these rules could make the SEC’s rules more acceptable if many companies are required to report under California’s rules. But one note of caution is that any further delay of the SEC’s climate rules could see some companies delay issuance while awaiting policy clarity.
Despite a potential cooldown in 2024, the USD ESG market will become more defined, credible and transparent. Investors will continue to value quality, become less tolerant of potential greenwashing, and look for specific metrics that prove a company’s ESG credibility. These metrics will also be used to better evaluate company risks and opportunities. As opposed to rushing straight into ESG bond issuance, companies may be inclined to first take the time to establish a solid sustainable finance framework while backing it up with detailed methodologies, transition plans and reporting schemes.
