ESMA sets double materiality and balanced impact disclosure as enforcement priorities

ESMA will press issuers this year on double materiality assessments and on how evenly they describe positive and negative impacts, according to its annual European Common Enforcement Priorities Statement. The statement, reported by ESG Today on 19 October 2026, keeps sustainability reporting as a focus topic and lists the materiality of impacts, risks and opportunities (IROs) and the double materiality assessment process as priority enforcement areas, as in recent years.

ESMA said it has observed some issuers providing more extensive disclosure on positive impacts than on negative impacts, which it said may not give users a sufficiently balanced view. The statement asks for comparable granularity on both sides and says IRO disclosures should cover the issuer's own operations as well as its upstream and downstream value chain.

ESMA said its enforcers will focus this year on ESRS E1 on climate change and S1 on own workforce, citing the advanced maturity of those topics. More broadly, it said it expects consistency across issuers' disclosures on IROs, policies, actions and targets (PATs) and metrics.

Where an issuer has no policies, actions or targets for a material IRO, ESMA wants that said explicitly. It asks issuers to explain how key actions help reach the corresponding policy objectives, to describe policies and IROs at comparable granularity, and to make clear how policies and targets address the IROs.

The statement also flags mismatches between the sustainability statement and other parts of the annual financial report, using IRO disclosures as an example. On targets, ESMA encourages issuers to disclose measurable, time-bound and outcome-oriented targets and to define them in clear terminology. The statement sets out what enforcers will examine in the current year's disclosures rather than adding new reporting requirements.

The enforcement priorities come days after ESMA published a thematic note on impact and transition claims for funds and bond providers. The note asked them to distinguish investor impact from investee impact and created no new obligations, as this publication reported.