The EU’s Corporate Sustainability Reporting Directive (CSRD) and its accompanying European Sustainability Reporting Standards (ESRS) require companies to disclose a lot of information. Among that information is key data on companies’ climate transition plans and strategies, and part of that disclosure includes explaining how these plans and strategies are funded. Real Economy Progress reports on a recent study from the French Autorité des Marchés Financiers (AMF) assessing company readiness stating:
“CSRD demands a level of granularity that can’t be captured by companies’ current tools, the report continued, suggesting that corporate spending would have to be monitored in a more automated way in future. One unnamed industrial company told AMF that it was ‘finding it difficult to monitor investments in systems – to identify them, track them and be able to report on them’ as it required a “major overhaul of various systems’.”
In addition to difficulties tracking funds spent on transition plans, money for investments is also getting harder to come by. The article notes that investments risk being postponed if clear profitability cannot be demonstrated. This often throws transition funding into turmoil, making it more difficult to report on transition funding and its sources. The article also points out that 1.5°C alignment alters business functions at a fundamental level, requiring board buy-in and oversight. However, the study indicated that many boards are not involved in the transition planning process due to its complexity which makes real buy-in and change difficult. Once the first round of CSRD reporting is complete, it will be interesting to see what investors do with this information and if companies with climate priorities will be favored. This may also prove instructive to US companies who may have their own struggles with climate finance.
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