Efrag consults on sustainability standards for captives and SMEs
The European Financial Reporting Advisory Group (Efrag) has opened a public consultation on two Exposure Drafts for sustainability reporting standards for SMEs, including captive insurers and reinsurers.
The association said that the standards should enable SMEs to deliver consistent and relevant information to business partners when they form part of a larger group’s supply chains, as well as banks and investors. The standards for captives will be proportionate, said Efrag.
The consultation period will run until 21 May, and Efrag invites all stakeholders to provide comments through the online consultation questionnaires. Interested parties are also invited to participate in the field test that will be run in parallel to the public consultation.
Efrag has been mandated by the Corporate Sustainability Reporting Directive (CSRD) to provide technical advice to the European Commission on European Sustainability Reporting Standards (ESRS), and to develop the standard for SMEs that are public-interest entities.
These include companies with transferable securities – bonds, shares and other securities admitted to trading on a regulated market in the European Union, small and non-complex institutions (SNCIs) and captive insurers and reinsurers (together LSMEs).
The ESRS LSME will be issued as a delegated act and will be effective on 1 January 2026, with an additional two-year opt out. The purpose of the ESRS LSME is to set reporting requirements that are proportionate and relevant to the scale and complexity of the activities, capacities and characteristics of LSMEs.
This is expected to help LSMEs gain better access to finance and avoid discrimination by financial market participants because it will deliver standardised sustainability information, said Efrag.
Efrag has also developed a voluntary sustainability reporting standard for non-listed SMEs (VSME). The EC SME Relief Package of September 2023 refers to VSME as a measure to support SMEs in accessing sustainable finance.
