EFRAG Study Finds Investors Fear Loss of ESG Data Quality

Why It Matters

If simplified ESRS erode data quality, investors may face higher uncertainty, affecting capital allocation and the credibility of EU green finance markets. Balancing reporting efficiency with analytical rigor is crucial for the CSRD’s long‑term success.

Key Takeaways

• Simplified ESRS cut mandatory datapoints by 61%
• Investors fear reduced data comparability and climate metrics
• Companies anticipate €3.7bn cost savings through 2031
• 67% of investors expect lower information quality
• Voluntary disclosures removed, raising transparency concerns

Pulse Analysis

The European Commission’s Omnibus I package aims to streamline the Corporate Sustainability Reporting Directive by trimming the European Sustainability Reporting Standards. By cutting over 70% of disclosed datapoints, the revised ESRS promise significant administrative relief for firms, especially smaller reporters, and an estimated €3.7 billion in cost reductions by 2031. Proponents argue that a leaner framework will improve usability, lower compliance costs, and encourage broader adoption of sustainability reporting across the EU.

However, the same simplification triggers alarm among ESG data users. Investors and financial institutions, who rely on granular, comparable metrics to assess climate risk and allocate capital, see a 55% likelihood of diminished information quality. The removal of voluntary disclosures and the shift toward estimated supply‑chain data threaten the granularity needed for robust scenario analysis and could undermine the EU’s ambition to channel capital toward truly sustainable projects. Concerns about reduced comparability and loss of critical climate indicators suggest that the perceived cost savings may come at the expense of market confidence.

Policymakers now face a delicate trade‑off: preserving the analytical depth that underpins green finance while delivering the reporting efficiency demanded by companies. A possible path forward includes phased implementation, where core mandatory metrics remain intact and optional deep‑dive disclosures are incentivised rather than eliminated. Such a hybrid approach could maintain data integrity for investors while still delivering meaningful cost reductions for preparers, ensuring the CSRD’s credibility and the EU’s leadership in sustainable finance.