67% of Investors Fear Simplified ESRS Will Cut Information Quality: EFRAG Study

An EFRAG cost-benefit analysis found that 67% of investors and financial institutions anticipate a negative impact on information quality from the proposed simplified European Sustainability Reporting Standards (ESRS), citing concerns including lower comparability and loss of critical climate data, while companies preparing sustainability reports expect €3.7 billion in cost savings from 2027 to 2031. The study was commissioned alongside EFRAG's release of the finalized revised ESRS.

EFRAG commissioned Prometeia and Syntesia to conduct an assessment of the costs and benefits of the Amended ESRS, drawing on an online survey and targeted interviews of CSRD Wave 1, Wave 2 and voluntary reporters, as well as users of ESG data including financial institutions, NGOs and industry associations. Companies expect a median 20% reduction in recurring internal costs among Wave 1 reporters, with 90% anticipating a reduction in internal costs and almost 75% expecting lower external costs such as IT, digital infrastructure and consulting expenditure. The total estimated saving to CSRD preparers is €3.7 billion over 2027–2031, representing a 34% reduction, rising to €4.7 billion or a 44% reduction when supply chain costs are included.

The divergence in perspectives between preparers and users reflects a fundamental tension in sustainability reporting regulation between reducing corporate compliance costs and preserving the analytical depth that investors and financial institutions require for risk assessment. Key information concerns among ESG data users include lower comparability (cited by 52%), loss of critical data in the climate standard (45%), loss of critical data in other environmental standards (43%) and less information due to relief mechanisms (43%). The concerns of European investors about data quality reduction in the ESRS have relevance for global sustainability reporting quality, as ESRS had been set to become the world's most comprehensive mandatory corporate ESG disclosure framework.

While 68% of ESG data users acknowledged the streamlining of ESRS would at least partially improve relevance and usability of sustainability data, notably none of the investors or financial institutions surveyed definitively anticipated these benefits. The report found that companies generally believed the amended standards would not negatively impact their access to green finance, a view not shared by most investors surveyed. EFRAG stated the consultation highlights a positive reception among preparers and a more cautious stance among users who emphasise the need to preserve analytical robustness and completeness. The report's findings will inform discussions between the European Commission and legislators as the Delegated Act formally revising the ESRS is prepared.

Key figure — €3.7 billion estimated cost saving to CSRD preparers from 2027–2031