CSRD and financial services: what investment firms need to disclose
The Corporate Sustainability Reporting Directive applies to large banks, asset managers, and investment firms in its first reporting wave, with obligations that go well beyond what general corporate CSRD guidance covers. This article explains what financial firms must disclose, how CSRD interacts with SFDR and the EU Taxonomy, and what the post-Omnibus landscape means in practice.
This article is for informational purposes only and does not constitute legal advice. Consult a qualified legal professional for advice specific to your situation.
Why financial firms face a different compliance problem
Most CSRD guidance is written for industrial companies: manufacturers, retailers, energy producers. The double materiality assessment, the value chain scope, the emissions metrics. For those firms, CSRD is demanding but structurally familiar. The sustainability impacts are largely physical, the value chains are traceable, and the materiality picture, while complex, is anchored in operations.
Financial firms face a different problem. A large asset manager may have minimal direct environmental impact from its own operations but hold hundreds of billions in assets whose carbon intensity, transition risk, and biodiversity exposure are highly material. A bank may employ thousands of people in clean offices while its loan book finances high-emission industries on a scale that dwarfs its operational footprint. The question of what a financial firm must disclose under CSRD is inseparable from the question of what it holds, finances, and invests in.
This article covers what CSRD requires of banks, asset managers, and investment firms: which entities are in scope, what the material disclosure obligations look like for financial sector reporters, how CSRD interacts with SFDR and the EU Taxonomy, and how the post-Omnibus regulatory landscape has changed the picture.
For a general introduction to CSRD and the ESRS framework, see CSRD and ESRS explained. For a broader map of EU sustainability regulation, see EU sustainability regulation in 2026.
Who in financial services is in scope, and when
The Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464, CELEX: 32022L2464) applies in waves determined by company type and size. Financial firms entered CSRD compliance at different points depending on their prior obligations under the Non-Financial Reporting Directive (NFRD) and their size.
Large financial institutions that were already subject to the NFRD, specifically listed companies, credit institutions, and insurance companies with more than 500 employees, were required to begin reporting under CSRD for the 2024 financial year. Their first CSRD-compliant reports were published in 2025. This group includes the largest EU banks, insurance groups, and asset managers. It is not a future obligation; it is already in effect.
The Omnibus I directive (Directive (EU) 2026/470, published 26 February 2026) significantly narrowed the scope of CSRD for companies outside wave 1. Under the revised thresholds, CSRD now applies to companies with more than 1,000 employees and net turnover exceeding EUR 450 million. The stop-the-clock directive (Directive (EU) 2025/794) postponed reporting requirements for wave 2 and wave 3 companies by two years. Wave 1 entities, including the large banks and asset managers that were already reporting, are not affected by these changes. They continue to report on the original timeline under the existing ESRS, with first-year transitional reliefs available for certain complex datapoints.
For mid-sized financial firms that fell into wave 2 under the original CSRD scope but do not meet the revised Omnibus thresholds, the obligation has been deferred and may not apply at all under the final Omnibus framework. Those firms should nonetheless monitor developments closely. The Omnibus package introduces a review clause, and firms that fall out of mandatory scope today may return to it if scope is reassessed in future.
Non-EU asset managers and investment firms with significant EU operations remain in scope under the non-EU group provisions: companies generating more than EUR 150 million in net EU turnover for two consecutive years, with at least one qualifying EU subsidiary or branch, will be required to report. That obligation applies from 2029 for the 2028 financial year under the post-Omnibus timeline.
What financial firms actually have to disclose
The ESRS framework contains twelve topical standards across environmental, social, and governance categories. Not every standard applies with equal weight to every financial firm. Materiality determines what must be disclosed, and for financial firms the materiality picture looks materially different from an industrial company.
Climate: the financed emissions question
ESRS E1 covers climate change. For most large financial firms, this is the most complex and most consequential standard. The reason is Scope 3 Category 15: financed emissions, also called portfolio emissions or enabled emissions.
For an industrial firm, Scope 3 emissions are the indirect emissions in its supply chain and downstream distribution. For a bank or asset manager, the equivalent is the greenhouse gas emissions attributable to its lending and investment activities. A large bank’s financed emissions can be orders of magnitude larger than its operational Scope 1 and 2 footprint. For many financial firms, financed emissions are the single largest component of their climate impact and, in a world of increasing transition risk, a significant source of financial materiality as well.
ESRS E1 requires disclosure of Scope 1, 2, and 3 emissions. The ESRS do not define a separate methodology for financed emissions, but the Partnership for Carbon Accounting Financials (PCAF) methodology is the established approach in practice and is referenced in both ESRS implementation guidance and SFDR technical standards. PCAF sets out attribution factors for different asset classes: listed equity, corporate bonds, business lending, project finance, mortgages, and others. Each carries different data availability challenges and different attribution conventions.
The ISSB published amendments to IFRS S2 in December 2025 that allow financial institutions to limit Scope 3 Category 15 disclosure to financed emissions while omitting other portfolio emissions such as derivatives. This ISSB amendment does not automatically change ESRS requirements, but EFRAG and the Commission have been working toward interoperability between ESRS and IFRS S1 and S2, and the practical treatment of portfolio emissions disclosures under ESRS is an area of active interpretive development.
Transition plan disclosures under ESRS E1 are also material for financial firms with significant exposure to high-emission sectors. A bank with large oil and gas lending must disclose how that exposure is being managed against its stated net-zero commitments, and how capital allocation decisions align with transition targets.
Governance
ESRS G1 covers business conduct: anti-corruption, political engagement, supplier relationships, and whistleblower protection. For regulated financial firms, many of the underlying obligations already exist under sectoral regulation. The CSRD disclosure requirement is additional but not structurally novel for most large institutions.
The governance disclosures under ESRS 2, which apply to all in-scope companies regardless of topical materiality, are more consequential. These require firms to disclose how the board oversees sustainability matters, which board members or committees hold responsibility, and how sustainability metrics are integrated into senior management incentives. For financial firms, the interaction between sustainability governance and existing regulatory expectations around governance, risk, and remuneration under CRD VI and MiFID II is an area where the disclosure must reflect actual practice, not just formal structure.
Own workforce
ESRS S1 covers a firm’s own employees. For large financial institutions with diverse, international workforces, this standard involves material disclosure on pay equity, workforce composition, health and safety, and collective bargaining. The data demands are significant for firms that have not previously tracked these metrics systematically.
One phase-in relief available to wave 1 companies under the quick-fix delegated act: firms with fewer than 750 employees may omit certain ESRS S1 datapoints in the first year. Most large banks and asset managers will not qualify for this relief given their scale, but it is relevant for mid-sized financial firms reporting for the first time.
What is likely not material for most financial firms
A large asset manager with no physical operations in food or timber supply chains is unlikely to have material disclosures under ESRS E5 (resource use and circular economy) or ESRS S3 (affected communities) beyond what the general disclosures under ESRS 2 require. The double materiality assessment drives the conclusion, not a presumption that all twelve topical standards apply equally. The discipline of the assessment is to identify which topics are genuinely material from both directions and focus disclosure effort there, rather than producing comprehensive but informationally thin disclosures across all topics.
How CSRD interacts with SFDR
The Sustainable Finance Disclosure Regulation (SFDR, Regulation (EU) 2019/2088, CELEX: 32019R0088) applies to financial market participants: asset managers, banks offering investment products, insurance companies with investment products, and pension funds. It requires entity-level disclosures on sustainability risk integration and product-level disclosures on how funds are classified and what sustainability characteristics they have.
CSRD and SFDR are distinct obligations with different logic. SFDR is a product and entity disclosure framework for investment products. CSRD is a corporate sustainability reporting obligation for the firm as a legal entity. They apply in parallel, and for large financial firms that are in scope for both, they create layered but not entirely redundant disclosure requirements.
The relationship is evolving. Following Omnibus I, only the largest financial firms in scope for the revised CSRD will produce entity-level sustainability reports under ESRS. The Commission noted that SFDR is now the primary regulatory vehicle for entity-level sustainability disclosures for the broader population of financial market participants that fall out of revised CSRD scope. This dynamic has shaped the Commission’s November 2025 SFDR review proposal, which introduced a streamlined product classification system intended to replace the Article 6, 8, and 9 categories with three simplified categories: Transition, Sustainable, and ESG Basics.
For firms in scope for both, the practical implication is that CSRD disclosures at entity level and SFDR disclosures at product level must be consistent. A firm that makes strong sustainability governance claims in its CSRD sustainability statement but classifies the majority of its assets under Article 6 with no sustainability integration will attract scrutiny from both investors and supervisors. The two frameworks are not audited together, but they are read together by sophisticated investors.
A detailed guide to SFDR obligations and the proposed revision is available here: SFDR explained: sustainable finance disclosure for fund managers.
How CSRD interacts with the EU Taxonomy
Companies subject to CSRD must also disclose their alignment with the EU Taxonomy Regulation (Regulation (EU) 2020/852, CELEX: 32020R0852). Specifically, they must report what proportion of their revenue, capital expenditure, and operating expenditure relates to Taxonomy-aligned economic activities.
For financial firms, the Taxonomy alignment disclosure takes a specific form. Banks must report the green asset ratio (GAR): the proportion of their assets that finance Taxonomy-aligned economic activities. Asset managers must report the proportion of their investments in Taxonomy-aligned activities. These are distinct metrics from the corporate GAR that applies to non-financial companies.
The GAR is among the most data-intensive disclosures financial firms face. Calculating it accurately requires counterparty-level data on whether the activities financed meet the technical screening criteria for substantial contribution, the do no significant harm test, and the minimum social safeguards. For lending books covering thousands of corporate borrowers, this data is frequently unavailable or unreliable, and financial firms have in practice reported significant proportions of their assets as non-eligible or non-aligned due to data gaps rather than because the underlying activities are genuinely unsustainable.
The revised Taxonomy Climate Delegated Act, adopted by the Commission on 4 July 2025 and entering into force in early 2026, introduces simplification measures for certain Taxonomy assessments. The simplified measures apply retroactively from 1 January 2026 for the 2025 financial year, though firms may choose to apply them from 2026 if more convenient. This is a meaningful relief for some Taxonomy calculations, but it does not eliminate the fundamental data challenge.
Under the Omnibus I framework, EU Taxonomy reporting obligations are now limited to companies meeting the revised CSRD thresholds of more than 1,000 employees and EUR 450 million in turnover. Firms that fall out of CSRD scope also fall out of mandatory Taxonomy reporting scope.
The double materiality assessment in practice for financial firms
The double materiality assessment is the methodological foundation of CSRD reporting. For financial firms, conducting it rigorously requires a clear view of two dimensions that are distinctive to the sector.
Financial materiality for investment firms is not limited to direct operational risks. The physical and transition risks embedded in a portfolio, the exposure to regulatory change in high-emission sectors, the reputational risk of financing activities associated with adverse environmental or social outcomes: these are all potentially material from the financial direction, and they require assessment at portfolio level rather than purely at the entity’s operational level.
Impact materiality for financial firms requires an honest assessment of the sustainability impacts of their financing and investment activities. A firm that provides significant debt financing to high-emission industries, or whose investment products concentrate in assets with poor environmental performance, has material impact materiality on climate even if its own offices have a small carbon footprint. The inside-out direction of the assessment cannot be satisfied by focusing only on operational impacts.
The double materiality assessment must be documented to a standard that survives the limited assurance engagement. For financial firms reporting for the first time, the common failure mode is an assessment that is too conservative on impact materiality, concluding that the firm has limited impacts because its operations are clean, without adequately interrogating the financed and enabled impacts of its activities.
What the post-Omnibus picture means in practice
The Omnibus simplification has not reduced the substance of what large financial firms must disclose. Wave 1 entities, the large banks, insurance groups, and asset managers that were already reporting under NFRD, continue on the original timeline with the existing ESRS, subject to the quick-fix transitional reliefs for specific complex datapoints. The Omnibus changes the picture for mid-sized and smaller firms, many of which have now been removed from mandatory scope or had their reporting timelines pushed back significantly.
The practical consequence for large financial firms is that the CSRD reporting universe around them has shrunk. The investee companies whose CSRD data was expected to improve the quality of financed emissions calculations and Taxonomy alignment assessments are, for many mid-sized and smaller corporates, no longer required to report. This makes the data availability challenge for GAR and financed emissions calculations more persistent, not less, in the near term.
The simplified ESRS, developed by EFRAG and expected to be adopted as a delegated act by mid-2026, target application from financial year 2027. Wave 1 companies will transition to the simplified standards from 2027 onward. The simplified ESRS reduce mandatory datapoints by approximately 61 percent, remove voluntary disclosures from the core framework, and introduce greater principle-based flexibility. The architecture of CSRD reporting, including double materiality, limited assurance, and XBRL digital tagging, remains unchanged. Simplification changes the volume of disclosure, not the accountability framework.
What to focus on now
For large financial firms already in wave 1 reporting, the immediate priorities are:
Financed emissions methodology and data. The gap between the legal requirement to disclose Scope 3 Category 15 emissions and the availability of reliable counterparty-level data is the most persistent operational challenge. Firms that have not yet implemented a structured financed emissions methodology, ideally PCAF-aligned and documented for assurance purposes, should treat this as urgent.
GAR data quality. The green asset ratio depends on data from borrowers and investees that many firms do not systematically collect. Improving data collection processes, and being transparent about the proportion of the portfolio assessed as non-eligible due to data gaps rather than genuine non-alignment, is both a compliance and a credibility requirement.
CSRD and SFDR consistency. As SFDR is revised and CSRD continues to mature, firms that manage these as separate reporting workstreams face increasing risk of inconsistency. Integrating the governance, data collection, and narrative development for both obligations reduces this risk and reduces duplication.
Assurance readiness. Limited assurance is not a light-touch review. Sustainability disclosures must be backed by documented processes, traceable data sources, and an audit trail. Claims that cannot be substantiated will not survive the engagement. Financial firms with strong financial reporting disciplines have an advantage here, but the extension of those disciplines to sustainability data infrastructure is not automatic.
For mid-sized financial firms now outside mandatory scope under Omnibus I: mandatory reporting obligations have been deferred or removed, but investor and counterparty expectations have not moved at the same pace. Large asset managers and banks subject to CSRD are still collecting sustainability data from their investee companies and borrowers, and the firms that can provide reliable data on request are at a commercial advantage over those that cannot.
Forseti monitors CSRD implementation guidance, simplified ESRS developments, SFDR revision progress, and the broader EU sustainable finance regulatory landscape continuously, anchored to verified official sources. Start for free.
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