Upright’s stance: CSRD is the world’s most comprehensive sustainability framework. Investors aren’t utilising it. This is why they should.

The EU’s CSRD regulation is transforming sustainability reporting for 10,000+ European companies, even after the Omnibus simplification package announced last week. At the core of CSRD, the ESRS (The European Sustainability Reporting Standards) has undoubtedly been the most debated sustainability framework in the past two years, setting detailed reporting standards for the companies in scope.

Beyond its scale, the ESRS stands out for its aim: it’s the first framework to measure material sustainability-related risks and opportunities through both financial and impact materiality.

This focus aligns perfectly with what investors seek when assessing potential investments through a sustainability lens. In fact, one of CSRD’s core objectives is to enhance investor decision-making. A staggering 90% of investors believe it will lead to better investment outcomes, found a Workiva survey.

Yet surprisingly, the investor community is underutilising CSRD data.

Why investors are hesitating on CSRD

Investors are holding back on CSRD not because they doubt its importance, but because of two rather practical uncertainties: availability and usability of CSRD data.

The original vision of CSRD – providing comparable and decision-useful data about companies’ material impacts, risks and opportunities to various stakeholders – wasn't the problem. We really do need information about both companies' impacts on the surrounding world, but also external risks and opportunities impacting companies’ finances.

The availability is now obviously hindered by the Omnibus, shrinking the EU company scope to ~10,000 and pushing the reporting timelines further in the future.

Part of the availability challenge, however, is expected to resolve soon as the first wave of CSRD reports from large European companies will start rolling out in the spring of 2025. Expectations from investors, reporting companies, and regulators alike are high, and analysis on early reports are already provoking heated debate.

But while much of the hype focuses on when data will be available, a more critical issue remains under-discussed: how usable it will be.

The critical usability questions for investors are:

• Will PDF reports enable drawing meaningful insight on companies?
• Will the disclosed data be consistent enough across companies to be useful in investment decision-making?
• Will the XBRL tagging function – the machine-friendly way to structure financial and business data in CSRD reporting – effectively standardise data?

At Upright, we wish to remain optimistic about CSRD improving reporting in the big picture but past experiences suggest some challenges ahead.

Whether looking at the patchy quality of SEC’s XBRL tagging or the glaring year-over-year inconsistencies even for individual company reports, history indicates that transforming CSRD data into actionable insights may be a less straightforward process than many hope.

Why act on 3rd party CSRD data instead of waiting for perfect disclosures

So, what should investors do? Instead of just waiting for the full details in perfect format, could and should investors adapt the world’s most significant sustainability reporting framework right now?

Rather than holding out for perfect CSRD disclosures, we’re seeing forward-thinking financial institutions harnessing the power of technology and big data to assess double materiality across portfolios of thousands of companies. For example, Pictet and the European Investment Bank use Upright’s CSRD data engine to conduct portfolio-level double materiality assessments that would not be possible by waiting for disclosures or assessing each company fully manually.

For use cases ranging from portfolio screening to portfolio-level CSRD compliance alike, tech-enabled approaches enable integrating external scientific evidence, comprehensive corporate financial disclosures, and advanced data modeling to create structured, comparable, and actionable insights.

And why act ahead of the curve instead of waiting?

The rationale is clear: If the topics outlined in the ESRS are truly material, investors should already be incorporating them into their valuation frameworks, regardless of when the official disclosures will become available.

And if you wait instead? If, when the long-awaited reports are published, the data turns out to be unusable, investors will have wasted time waiting. In contrast, relying on comparable third-party data now allows investors to make informed decisions without delay.

Written by: Valtteri Vulkko, COO at Upright

More on impact in investing from Upright:

• Upright operates the world’s most comprehensive third-party CSRD double materiality database, with data openly accessible on the Upright Platform here.
• Want to discuss how Upright’s science-based data can benefit you? Book a demo here.

Join Upright’s launch webinar on March 11, 2025: Publishing live CSRD double materiality quantifications for 50,000+ companies – register here.