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Publication date: 01 Mar 2024
gx ESRS implementation Q&A Platform explanations 2/2024
ID 217 – Prudential consolidation
Question asked
Should an undertaking prepare its ESRS consolidated sustainability statement following the requirements relating to prudential consolidation laid down in Part One, Title II, Chapter 2 of the Capital Requirements Regulation (EU) 575/2013?
ESRS reference
ESRS 1 paragraph 62
Background
ESRS 1 paragraph 62 states: ‘The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group.’
In its answer to ID 2013-310 for Regulation (EU) No 575/2013 (CRR), the European Banking Authority states the following:
‘Article 18(1) of Regulation (EU) No. 575/2013 (CRR) requires institutions to carry out a full consolidation of all institutions and financial institutions which are its subsidiaries for the application of prudential requirements on a consolidated basis.
‘Undertakings, other than institutions and financial institutions which neither acquire holdings nor pursue any of the activities listed in points 2 to 12 and point 15 of Annex I to Directive 2013/36/EU (CRD), are excluded from the scope of prudential consolidation irrespective of whether or not these undertakings are directly or indirectly held by the parent entity. As a result:
- Non-financial subsidiaries are excluded from the scope of prudential consolidation regardless of whether these subsidiaries are fully held by a holding company. On the other hand, the holding company is included for prudential consolidation purposes;
- Conversely, any holding company needs consolidating even when it holds no participation in a financial subsidiary. However, all its participations are excluded for prudential consolidation purposes.’
Answer
In accordance with ESRS 1 paragraph 62, sustainability statements shall be prepared for the consolidated group; therefore, they shall not be grounded in a consolidation based on prudential requirements. The reported information shall meet the qualitative characteristics of information and the requirements in ESRS 1 paragraphs 54, 57 on level of disaggregation: on this basis, if applicable and helpful to produce more understandable and relevant reporting, the undertaking could disaggregate the reported disclosures between those related to the scope of financial consolidation and those related to the scope of prudential consolidation. This is particularly relevant if the undertaking uses the option to incorporate by reference information presented in its Pillar 3 reports (ESRS 1 paragraphs 119/122).
EFRAG
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