BPI and UK Finance Comment on EFRAG’s Sustainability Reporting Standards for Non-EU Groups

Dear Mr. Koktvedgaard,

We - associations representing financial institutions headquartered outside the EU that maintain a presence, investment footprint and long-term commitment to the EU - appreciate the opportunity to comment on EFRAG's Exposure Draft of the European Sustainability Reporting Standards for certain non-EU undertakings in accordance with Article 40a of the Accounting Directive (ESRS 40a).

We acknowledge the objective of establishing a reporting framework for third-country groups that provides transparent information on sustainability-related impacts connected to significant activity in the EU. At the same time, ESRS-40a should reflect the distinct legal basis, policy purpose and reporting context applicable to third-country undertakings. In our view, the final standard should achieve transparency and accountability while remaining proportionate, operationally feasible and interoperable with existing sustainability reporting frameworks. As part of this, it should include an appropriate basis for establishing equivalence with international standards.

Even where we continue to hold reservations regarding certain aspects of the Corporate Sustainability Reporting Directive's (CSRD) extraterritorial application scope, we welcome several aspects of the Exposure Draft, including the inclusion of the mixed approach, the preservation of reliefs and simplification measures introduced under the revised ESRS, the availability of an incorporation by reference mechanism, the retention of a location-agnostic reporting approach and the flexibility in report structuring. However, we believe that a number of important elements require further refinement to ensure that ESRS-40a delivers on its stated objective without creating unnecessary complexity, legal uncertainty or disproportionate reporting burdens:

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