New regulation leads to major challenges

Private equity companies and non-financial reporting

Kollegen schauen auf Tablet
  • Article
  • 3 minute read
  • 05 Jul 2023

The importance of sustainability for the long-term financial performance of investments is steadily increasing. Private equity investors in particular now regularly consider the management of ESG performance as part of value creation during the holding period.

New regulatory requirements for sustainability reporting also require companies to make complex adjustments to their reporting systems.

This affects private equity investors themselves through the Sustainable Finance Disclosure Regulation (SFDR), which requires, among other things, that opportunities and risks arising from sustainability be taken into account in investment decisions. On the other hand, in the short term this also affects almost all portfolio companies of private equity investors in the European Union through the Corporate Sustainability Reporting Directive (CSRD).

Your expert for questions

Klaus Bernhard
PE Assurance Leader at PwC Germany
Tel.: +49 711 25034-5240

Which companies are affected by CSRD reporting?

From the 2025 financial year, all large companies (defined as having at least two out of three: 250 or more employees, a balance sheet total of more than €20 million and a turnover of more than €40 million on two consecutive annual financial reports) are required to apply the CSRD reporting. Numerous portfolio companies will fall within the scope of this directive from that point on.

The CSRD requires large companies to publish reports on how their activities impact people and the environment and the ESG risks or opportunities they face under the framework of the twelve European Sustainability Reporting Standards (ESRS). Certain disclosures (e.g. ESRS E2: General Disclosures) are mandatory and must always be disclosed. Further obligations arise from the results of a materiality analysis according to the principle of double materiality (impact materiality and/or financial materiality). The additional disclosures for sustainability reporting can then be derived from the individual standards.

What does this mean in concrete terms for private equity investors and their portfolio companies?

The CSRD and the ESRS require holistic reporting on sustainability issues. In addition to the disclosure of numerous KPIs, this also includes information on strategy, opportunities and risks, corporate governance, and sustainability goals.

The additional information must be included in the management report and is subject to external assurance. In concrete terms, portfolio companies must therefore provide their relevant data in reliable and assurance-proof documentation. Processes for generation, retrieval, and aggregation together with a suitable control system must be established and integrated into existing financial statement preparation processes and schedules.

“We have the big picture in mind and not only provide support at the content level, but strive for a goal-oriented implementation of sustainability issues. On the one hand, this means setting up lean and efficient clusters in the portfolio and adapted reporting structures in order to fulfill the legal obligations. And on the other hand, for us it means deriving value creation potential in the holding period.”

Klaus Bernhard,PE Assurance Leader at PwC Germany

Do you have any questions?

Contact our experts

Our scalable advisory approach for portfolio companies

Holistic CSRD implementation approach

Development of a holistic CSRD implementation approach for all reportable companies in the portfolio

Scalable materiality analysis

Conducting a scalable materiality analysis to identify material topics according to impact materiality and financial materiality

Complete reporting

Establishing full reporting on numerous non-financial quantitative and qualitative KPIs

Derivation of value creation potentials

Derivation of value creation potentials on the basis of significant opportunities and risks as part of the strategy in the holding period

“The time to implement the CSRD is pressing and will affect a large number of companies from 1 January 2025, and from 2024 even publicly traded companies that have not had any mandatory contact with sustainability issues and reports so far. Especially for medium-sized portfolio companies, resources are scarce and the level of concern is high. With us at your side, we promise you a scalable, resource-efficient and pragmatic implementation of the requirements through CSRD for the entire portfolio.”

Klaus Bernhard,PE Assurance Leader at PwC Germany
Follow us

Contact us

Klaus Bernhard

Klaus Bernhard

Partner, PwC Germany

Steve Roberts

Steve Roberts

Leiter Private Equity bei PwC Deutschland und auf EMEA-Ebene, PwC Germany

Tel: +49 69 9585-1950