CSSF Warns Issuers on Outstanding ESG and APM Issues
The Luxembourg Financial Regulator, CSSF, has issued a stern warning to issuers regarding outstanding issues related to Environmental, Social, and Governance (ESG) reporting and Alternative Performance Measures (APMs).
ESG Reporting Concerns
According to the regulator, issuers have failed to provide adequate transparency on their ESG performance, particularly with regards to supply chain emissions. “Issuers must take responsibility for measuring their environmental and social scopes across their entire value chain,” said a CSSF spokesperson.
- The CSSF is urging issuers to provide more robust data collection processes to ensure accurate reporting.
- The regulator has expressed concerns over the quality of data used in non-financial reporting.
APM Concerns
The CSSF has identified several areas of concern regarding APMs, including:
- Unclear and misleading labels
- Inadequate disclosure
- Overemphasis on APMs compared to IFRS measures
- Using APMs to adjust for macro-economic factors such as inflation or changes in discount rates
“APMs must be clearly labeled and not used as a means of manipulating financial performance,” warned the regulator.
Compliance Reminders
The CSSF has also reminded issuers that their Annual Financial Reports (AFRs) must comply with the European Single Electronic Format (ESEF), including the mandatory mark-up of certain elements in the consolidated financial statements.
- Issuers are encouraged to refer to the dedicated page on the ESMA website for supplementary guidance material on ESEF and APMs.
- The CSSF will pay particular attention to compliance during its 2023 campaign.
Industry Response
Industry observers believe that the CSSF’s warnings are a clear indication that regulators are cracking down on lax reporting practices, and that issuers must take immediate action to ensure compliance with regulatory requirements. “The stakes are high, and non-compliance will not be tolerated,” said one expert.