Chiara Del Prete

Efrag, the European Financial Reporting Advisory Group, was tasked by the European Commission to draft the European Sustainability Reporting Standards (ESRS).

TMI: Thank you for accepting to answer our questions. What do you think about the stage the ESRS process has reached so far, and what have the main challenges been?

CDP: The overall ambition is to bring sustainability reporting on equal footing to financial reporting in terms of availability and reliability of data and having a robust set of standards is a key step in this direction. Of course the standards need to be accompanied by meaningful and timely implementation support and this is why Efrag has focused a substantial amount of efforts in guidance and questions and answers since spring 2023. The timeline has been the main challenge: standard setting normally takes several years. In our case the entire process lasted three years and covers 10 different topics, spanning from environment to social to governance. But at the same time, despite the short timing available, a full due process took place, including public consultation and the involvement of civil society in the categories of stakeholders involved in the decision-making.

TMI: Can you outline the main milestones that have been achieved over the past two to three years?

CDP: Obviously, I would mention here the public consultation on the first set of standards, ESRS for large undertakings, issued in July 2023. From several uncoordinated standard setting initiatives, Europe now has a structured reporting regime designed to enhance the quality of the reported information. The process started in 2020, with an Efrag-dedicated task force that developed the exposure drafts. The EU's Corporate Sustainability Reporting Directive requires annual consultation on our activities. We have given priority to small medium enterprises and to helping with first implementation, but we are also working on sector-specific ESRS, Non-EU standards, taxonomy and interoperability with other standards.

TMI: We know that the ESRS focuses directly on listed and large companies. Does this mean that non-listed SMEs and micro companies can ignore them?

CDP: SMEs are at the centre of Efrag activity. They play a crucial role in European economy and in the value chain of large companies that are subject to different reporting obligations. Efrag is working to deliver to the Commission a voluntary standard for non-listed companies. This standard is expected to provide a proportionate tool for smaller companies to start understanding and managing their sustainability matters, as well as reducing the burden associated with dealing with multiple and uncoordinated data requests from banks, large corporates for supply chain management and investors. The voluntary standard was very well received and we are confident that it can play a relevant role in supporting smaller companies.

TMI: How will the CSRD and ESRS align with other global sustainability reporting frameworks such as the Global Reporting Initiative (GRI) and the IFRS?

CDP: Thanks to intense joint work, both during the standard setting and afterwards, European companies that prepare ESRS sustainability statements are able to claim at the same time compliance with GRI by reference and with IFRS S1 and S2, provided that few adjustments are made to the reported data. This is illustrated in the joint interoperability guidance IFRS-ESRS issued in May. This is great news for European companies. The interoperability guidance explains also how companies that start from IFRS S1 and S2 can comply with ESRS. Interoperability work now continues in terms of digital reporting and sector standards.

TMI: What role do you see for digital reporting tools and technology in enhancing the transparency and effectiveness of sustainability reporting under the CSRD?

CDP: The CSRD requires digital reporting, which will be effective once the legislative process for the taxonomy will be completed. The first step is the advice that Efrag will release in a few weeks to the Commission of a draft taxonomy that reflects the content of the standards. ESMA (European Securities & Markets Authority) will consult on this draft to determine the effective tagging rules and timing. Digital reporting will support meaningful use by digital users, including data aggregators, with benefits in terms of both usability and availability of comparable data.

TMI: What is the plan to ensure consistency and comparability of sustainability reports across different industries and sectors?

CDP: The ESRS architecture foresees three layers of disclosure: sector agnostic (ESRS adopted in July 2023), sector specific (to be adopted in annual batches starting from June 2025) and entity specific (left to the informed judgement of the companies to respond to their facts and circumstances). The sector standards complement the sector agnostic disclosures with guidance that will reduce the necessity of unstructured entity specific disclosures, including the identification of matters that are most material for the sector and associated metrics. The first batch will be put in consultation in 2025.

TMI: What measures are being taken to ensure that the reporting standards remain adaptable to future sustainability challenges and evolving market conditions?

CDP: The directive foresees that the Commission should review the standards every three years to take account of relevant developments.

TMI: Thank you for your time, looking forward to following your presentation at Terra.

Andrey Chicherin

Since 2010, the Green Climate Fund has funded nearly USD14bn worth of projects worldwide aimed at accelerating climate action, enhance resilience and promote sustainable development in developing countries.

TMI: Can you share your impressions of the progress the Green Climate Fund has made so far in addressing global climate challenges?

AC: The Green Climate Fund (GCF) portfolio has expanded significantly, with over 250 projects to support mitigation and adaptation projects. GCF worked on simplifying and streamlining funding processes, engaging in dialogues with countries and partners to understand financing needs and challenges. It also improved the speed of delivery, from proposal review to fund disbursement. Beyond being a mere funding channel, GCF evolved into a climate finance catalyzer. It collaborates with a global network of public and private sector partners, fostering coalitions and investments for climate action worldwide. The fund aims to drive systemic transitions in critical areas like energy, sustainable food systems, climate-resilient infrastructure and biodiversity protection.

TMI: What are the next major steps for the GCF in scaling up its impact?

AC: Our Strategic Plan for 2024-2027 mentions several developments including exploring Innovative Financing Mechanisms such as debt-for-climate swaps, carbon markets approaches and project specific accreditation. These mechanisms can help mobilise private sector investments and accelerate climate solutions at scale. We will also work on the Implementation of a Readiness and Preparatory Support programme and on Strengthening Country Ownership.

TMI: What have been the biggest challenges in mobilising and deploying climate finance?

AC: GCF is a relatively young multinational financial organisation and growth problems are inevitable. They include complex and lengthy approval processes, changing priorities along the review cycle, lack of institutional clarity on the climate rationale for mitigation and adaptation projects, and risk appetite for particular projects. GCF addresses these gaps with the approval of strategic plans and policy documents that guide the decision-making at the fund, implementation of the adaptive project management process to ensure feedback loops and constant learning of valuable lessons with the assessment of past activities by its Independent Evaluation Unit. The fund has established simplified approval process for small and low-risk of adverse impact projects. Several thematic requests for proposals were launched and became an additional source of impactful project ideas.

TMI: Can you discuss a successful project funded by the GCF?

AC: Most of the projects and programmes approved by GCF have been success stories. They bring highly impactful and much-needed funding to remote parts of the world, catalyze co-financing from public and private sources, ensure environmental, social and gender integrity alongside the climate mitigation and adaptation impacts. One such project is Desert to Power G5 Sahel Facility - a transformative programme supported by GCF and the African Development Bank. It aims to address energy challenges in the Sahel region of Africa, specifically in the group of five for the Sahel countries: Burkina Faso, Chad, Mali, Mauritania and Nigeria. The facility taps into the immense solar energy potential of the Sahel region to provide cheaper, reliable and low-emission electricity to end users. It tackles barriers hindering solar energy investments and creates an enabling environment for private sector funding in solar innovations. The GCF's investment of USD150m leverages financing from the AfDB and the private sector, totaling almost USD1bn for large-scale solar generation in the least developed countries of Africa.

TMI: How does the GCF support the development and deployment of state-of-the-art green technologies?

AC: GCF deploys its entire range of financial instruments to promote innovation in practices, business models, technologies and support local institutions, particularly through enhancing direct access to GCF resources. We seek to provide early-stage financing to new pre-commercially viable technologies, business models and climate initiatives and deploy first-loss anchor investments. Through these means, GCF can also help developing countries create the conditions, in line with national circumstances and priorities, making finance flows consistent with a pathway towards low-emissions and climate-resilient development pathways.

TMI: Can you highlight some of the most promising green technologies that the GCF has funded recently?

AC: Among the recent green technology initiatives funded by the GCF are the Climate Technology Incubators/Accelerators Programme for Latin America and West Africa, grid scale energy storage innovation funding component allocated in the Desert-to-Power Programme, e-mobility solutions in multiple countries funded through the recently approved programme in collaboration with the Asian Development Bank and others.

TMI: What are the key challenges in integrating cutting-edge green technologies into large-scale projects?

AC: News on the promising scientistic discoveries or successful tests of the implementation solutions come to us on a daily basis. Unfortunately, big projects are not well suited for new, untested technical solutions, where the cost of fixing unknown issues can be extremely high. Some technological solutions may be complicated by side considerations where overall balance of costs and benefits may not be in favour of their deployment. To address this, GCF can structure its innovation projects as an institutional infrastructure to support an enabling environment for the initial stage of the ideas development, for example through our incubators/accelerators programmes. Also, some projects can have a dedicated funding component, supporting a specific technology suitable for a pilot-scale implementation within the project context. In partnership with dedicated accredited entities, such as technology funds, GCF aligns financial priorities of the project stakeholders with the ultimate goal of efficient support for the climate innovation and technology transfer.

TMI: Thank you for your time, looking forward to following your presentation at Terra