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EU-listed securities face review as ESG rules hit multinationals


Companies based outside Europe are reviewing securities they’ve listed in the bloc, as the implications of an overlooked clause in new ESG reporting rules sink in, according to Bloomberg.

International companies that have issued stocks and bonds in the EU may need to comply with Europe’s Corporate Sustainability Reporting Directive (CSRD) as soon as January, according to lawyers advising corporate clients affected by the new rules. That’s four years earlier than many had expected, and may drive a number of non-EU companies to cancel their EU securities, the lawyers said.

The situation has caught many companies off guard, said Iyes Igiehon, an environmental attorney with Linklaters in London. Large multinationals were expecting to have to comply in 2028, she said. But it’s now clear that more non-EU companies are going to need to comply from 2024, she said.

So they’re “considering the possibility of delisting,” Igiehon said.

William-James Kettlewell, senior associate at Baker McKenzie in Brussels, said he’s urging corporate clients to “be vigilant” and “prepare for” the possibility that they’ll need to comply with CSRD much earlier than they expected.

“We’ve seen that businesses aren’t always fully aware that they have, for example, some bonds on EU-regulated markets, which can lead to some bad surprises,” he said.

There are more than 1,000 CSRD reporting requirements covering a range of environmental, social and governance factors. Lawmakers in the US and the EU have argued that elements of the requirement, which also involve corporate value chains, are too onerous. But CSRD disclosures remain on track to go into effect next year, after a last-ditch effort by some EU lawmakers to derail the process fell flat.

The EU has estimated that as many as 50,000 companies operating in the bloc will have to comply with CSRD. Around 10,000 non-EU companies are likely to be affected, according to calculations earlier this year by data provider Refinitiv. Roughly 3,000 US companies are expected to be impacted, according to an August estimate by Deloitte.

Non-EU companies have been advised by accountants to check with their lawyers, because of the complexity around figuring out who needs to report what and when. 

“We’re spending a lot of time with clients in trying to interpret what’s actually meant by the CSRD rules,” Igiehon said. That includes in particular “the scope of entities that are caught” and subsidiary versus group reporting requirements and deadlines. 

Due to its scope, CSRD is being phased in over several years. It’s a key pillar in EU legislation designed to make the bloc’s economy sustainable. Companies are supposed to disclose not just the ESG risks they face, but also their ESG impact. Otherwise known as double materiality, the dual reporting requirements are a particular sticking point for non-EU companies.

“It is a different type of reporting and the rules in particular are very prescriptive,” Igiehon said. However, “quite a few clients are at least toying with the idea of whether they can voluntarily report, because actually for a lot of them it would be a lot easier if they could just report on a group level earlier.”

For now, non-EU companies need to make sure they’re tracking the securities they’ve listed in the bloc.

Kettlewell said “the worst-case scenario is, for example, if the top company of your group has bonds that you hadn’t thought about on an EU-regulated market.” That means “suddenly, your entire group may be subject to the new reporting obligation,” and as early as next year, he said.