Sustainability Disclosure
Sustainability Disclosure
Disclosures in relation to sustainable investments and ESG factors
The Sustainable Finance Disclosure Regulation (SFDR) obliges financial market participants and financial adviser to make certain disclosures in relation to sustainable investments and ESG factors (Environmental, Social, and Governance).
The SFDR’s objective is to promote transparency in the consideration of sustainability risks and factors in investment decisions, the prevention of greenwashing and assisting investors in making well-founded decisions in relation to sustainable investments.
Transparency obligations include disclosures about how sustainability risks are addressed and the Principal Adverse Impacts (PAIs) as well as product-related disclosures about how sustainability is incorporated into the remuneration policy.
Under the SFDR, financial market participants are required to disclose both at entity level and at financial product level about whether or how they take the principal adverse impacts of investment decisions on sustainability factors into account. In 2025, the FMA is setting a cross-sectoral analytic focus on disclosures about principle adverse sustainability impacts in the Austrian financial market.
Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector sets out harmonised rules for financial market participants and financial advisers on transparency in relation to disclosure about the integration of sustainability risks and consideration of adverse sustainability impacts in their processes and in providing information about the sustainability of financial products. It has applied since 10.03.2021. The following disclosure obligations arise from the SFDR:
- Disclosures on websites:
- Transparency of sustainability risk policies pursuant to Article 3 SFDR
- Transparency of adverse sustainability impacts at entity level pursuant to Article 4 SFDR
- Transparency of remuneration policies in relation to the integration of sustainability risks pursuant to Article 5 SFDR
- Disclosures in pre-contractual documents:
- Transparency of the integration of sustainability risks pursuant to Article 6 SFDR
- Transparency of adverse sustainability impacts at financial product level pursuant to Article 7 SFDR
The specific rules regarding disclosures in pre-contractual documents depending on whether under Article 8 SFDR
it relates to a financial product, that is marketed using ecological or social characteristics (known as “light green” products),
Or whether it relates to a financial product that endeavours to invest in a sustainable manner (known as “dark green” products).
- Disclosures in periodic reports.
Regulatory Technical Standards have been published in a delegated Regulation to the SFDR (CDR (EU) 2022/1288) that specify the details regarding the content, methodologies and presentation of sustainability-related information. The delegated Regulation also contains reporting templates for Principal Adverse Impacts (PAI) and reporting in accordance with Articles 8 and 9 as an Annex.
In addition, some Q&A and similar products have been published in relation to the SFDR, e.g.:
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Article 18 SFDR obliges the European Supervisory Authorities (ESAs) to conduct a stock-take of the extent of voluntary disclosures of entities and products and to submit a report to the European Commission annually about best practices and making recommendations regarding voluntary disclosure.
The 2025 report can be found here.
Corporate Sustainability Reporting Disclosures
Following the introduction of the EU’s Corporate Sustainability Reporting Directive (CSRD), a large number of entities are obliged to report about their environmental and social impact they caused, as well as the environmental impact on the entity. As a result, in the future there will be a greater amount of standardised information on sustainability aspects. To ensure the quality of the information made available, a mandatory external auditing of sustainability reports is stipulated. In addition, sustainability reports are also part of annual financial reports, that fall in the scope of the Financial Market Authority’s (FMA) enforcement of accounting and the Austrian Financial Reporting Enforcement Panel.
Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive (CSRD) was published in the Official Journal of the European Union on 14.12.2022. It substantially modifies the existing provisions on sustainability reporting. First and foremost, the future Article 19a of the Financial Statements Directive as amended by the CSRD broadens its scope. Whereas only large undertakings that were public-interest entities with an average of more than 500 employees were hitherto required to submit a non-financial statement, this requirement will be extended in the future to cover all large entities, irrespective of whether or not they are exchange-listed, as well as exchange-listed small and medium-sized undertakings, although some simplifications are intended for the latter. Micro-undertakings remain excluded from this requirement. Another significant regulatory aspect is the introduction of binding standards for the sustainability reporting in the future Article 29b of the Financial Statements Directive as amended by the CSRD. These standards’ purpose is to specify and harmonised the sustainability information that is to be disclosed based on the three Environmental, Social and Governance (ESG) reporting pillars. The CSRD also stipulates that mandatory presentation of the sustainability report in the management report – the alternative option for a separate report no longer exists. Furthermore, the obligation is also introduced to have the sustainability report reviewed by an external source.
The European Financial Reporting Advisory Group (EFRAG) is responsible for the technical drafting of the European Sustainability Reporting Standards (ESRS). The first set of ESRS were adopted in July 2023 with the adoption of Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards (Delegated Regulation (EU) 2024/90457).
Pursuant to Article 7 CSRD, the CSRD shall first apply to financial years that begin on/after 01.01.2024 – however applicability will also occur on a gradual basis depending on the type of undertaking. In April 2025, Directive (EU) 2025/794 of the European Parliament and of the Council amending Directive (EU) 2022/2464 and (EU) 2024/1760 amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements was adopted, with applicability being temporarily postponed for certain types of entities.
As the legal act in question is an EU Directive, Member States will need to issue transposing legal acts under national law (national transposing legislation), which is still awaited.
Taxonomy Regulation (TR)
As the central legal act in European regulation, Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 defines whether an economic activity is classified as sustainable in order to be able to determine how environmentally sustainable an investment is.
The legal definition of environmentally sustainable economic activities set out in Article 3 in conjunction with Articles 10 to 18 TR is a central concept, under which an environmentally sustainable economic activity is an economic activity that:
Furthermore, the provisions in the Taxonomy Regulation that are particularly relevant for financial market participants are those regarding
- Transparency in pre-contractual disclosures and in periodic reports regarding environmentally sustainable investments (Article 5 TR), financial products that promote environmental characteristics (Article 6 TR) and other financial products (Article 7 TR) as well as regarding
- Transparency of undertakings in non-financial statements (Article 8 TR).
Disclosure and Reporting Obligations under the Capital Requirements Regulation (CRR III)
As a result of the Banking Package 2021 at European level being implemented in CRR III and the Capital Requirements Directive (CRD VI) new reporting provisions have been introduced for all institutions regarding their exposure towards ESG risks. Disclosure requirements regarding environmental, social and governance risks (ESG risks) under Article 449a CRR III are being extended to all institutions. Environmental, Social and Governance Risks are distinguished between, an environmental risks subdivided into physical risks and transition risks. Institutions disclosure information about ESG risk, including the total risk exposures towards entities in the fossil fuels sector, as well as how the institutions include the identified ESG risks in their business strategy and processes, their governance and risk management.
In addition the Implementing Technical Standards as regards the disclosure of environmental, social and governance risks (Delegated Regulation (EU) 2022/2453) published in December 2022 are being updated and a new implementing technical standard on the reporting of ESG risks to be drawn up within twelve months of CRR III entering into force. The specific formulation of indicators for supervisory reporting and disclosure of ESG risks observing the principle of proportionality is therefore still outstanding.