Dutch regulator AFM increases oversight on companies' green claims

The Netherlands Authority for the Financial Markets (AFM) is strengthening its supervision on the authenticity of green investments and compliance with sustainability legislation by companies. In its new annual report, the AFM emphasizes that companies must also become greener and follow the rules. This tightening of supervision is also an important signal for the real estate sector, which is responsible for almost 40% of CO2 emissions.

From January 1, 2024, transparency rules regarding sustainability information (ESG) for large listed companies will be tightened by the Corporate Sustainability Reporting Directive (CSRD). This should provide more insight into the impact of climate change on the value development of companies and their effect on the environment. The AFM has conducted an exploration into current climate reporting and assurance, and concludes that there is still much work to be done to meet the new requirements.

The AFM's research shows that half of the 27 companies surveyed report insufficiently on negative environmental and social effects. The majority also lack transparency about the (financial) consequences of climate change and the energy transition for their operations. In addition, half of the companies are unclear about how they intend to achieve their climate goals.

Start collecting available and reliable sustainability information in time To comply with the CSRD, companies must develop or update a sustainability strategy and set up processes and systems to measure and achieve sustainability goals. It is essential that companies invest in this in a timely manner, as they must report on this information in 9 months.

The comprehensibility of accountants' assurance statements on sustainability can be improved. Accountants must make the challenges and dilemmas surrounding the application of the CSRD transparent in their assurance statement, so that more clarity is provided about the nature and depth of the work performed.

Investments in expertise and capacity around sustainability reporting and assurance are of great importance, both for companies and for accounting organizations. The external accountant provides 'assurance' on the sustainability information, and the number of assurance assignments will increase significantly due to the expansion of the rules.

From 2025, the CSRD will apply to all large companies, followed by medium-sized and small listed companies in 2026. This means that not only these companies, but also their supply chain partners, such as suppliers, must have their sustainability information in order.

Click here for the AFM's annual report (in Dutch).