A study on the sustainability reporting practices of financial firms complying with the Corporate Sustainability Reporting Directive (CSRD) and the related European Sustainability Reporting Standards (ESRS) has been released by the Danish Financial Supervisory Authority (DFSA).
We spoke to the DFSA about the conclusions drawn.
What motivated the DFSA to carry out this study?
The CSRD introduces new and comprehensive reporting requirements, entailing data-related challenges and other compliance-associated adjustments. The DFSA conducted the study to gain insight into how companies are working with, for example, the double materiality assessment, as this forms the basis for the entire sustainability report.
The DFSA expected companies to engage earnestly and thoroughly with both the double materiality assessment and sustainability reporting. Generally, this expectation was met.
The study highlighted shortcomings in, for example, scope 3 greenhouse gas emissions data and stakeholder engagement. Have any good practices, from a regulatory perspective, been identified?
The DFSA acknowledges that it can be challenging for companies to provide this information in their sustainability reporting, as market data remains somewhat immature.
The regulation is still so new that we have not identified or communicated good practices as such at this time. However, the DFSA remains focused on maintaining a transparent dialogue with stakeholders, providing the best possible guidance to companies and closely monitoring the ESRS revision and EU supervisory developments.
The Omnibus I package has brought in significant changes to the CSRD. How many financial companies in Denmark would remain in CSRD scope?
Approximately 10–15 financial institutions are expected to be subject to the CSRD following changes stemming from Omnibus I, if the companies’ 2024 annual report revenue and employee figures are used as a basis for their categorization. This compares to approximately 95 financial institutions under the original CSRD scope.
From January 1, 2026, new provisions on the management of ESG risks come into force, targeting credit institutions. Are there overlaps between the supervisory reporting and the CSRD changes?
The CSRD and the new provisions on ESG risk management are two distinct areas – the first requires companies to publicly report on sustainability IROs; the second concerns how institutions manage the impact from ESG factors on their overall financial resilience.
However, Omnibus I included a recital asking legislators to avoid conflicting requirements and double reporting within the broader ESG area.
Prudential rules for credit institutions’ public disclosure of ESG factors are expected to reflect the Omnibus changes and their focus on reducing information requirements.
DFSA has highlighted continued focus on guidance rather than supervisory action. What type of support can the financial sector expect?
The regulation is very new, and EU developments in the area are currently progressing rapidly. The DFSA will continue supporting with guidance, aiming to strengthen companies’ understanding of and compliance with the rules.
Previously, the DFSA publicly announced that it would focus on guidance to the sector – however, in cases of serious errors, supervisory measures will be applied. This approach is also consistent with DFSA’s obligations at the EU level.