CSRD from 2027 – Why 2026 will be a crucial year for CFOs

CSRD from 2027 – Why 2026 will be a crucial year for CFOs

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Following the regulatory postponement, the Corporate Sustainability Reporting Directive (CSRD) will become mandatory for many large companies for the first time in the 2027 financial year. The first report will be published in 2028. At first glance, this seems like a delay. In practice, however, it is a tight timeframe.

Because CSRD is not a reporting project. It is a management project.

 

From sustainability report to balance sheet relevance

The CSRD integrates climate-related risks, transition strategies, and key ESG issues into regular corporate reporting. Among other things, it requires:

– Double materiality analysis
– Disclosure of physical and transitional climate risks
– Scenario analyses
– Integration into management reports and governance structures
– Verifiable, consistent data bases

This means that climate risks are leaving the sustainability department and ending up in the remit of finance, risk, and the executive board.

Physical risks such as flooding, heat, or supply chain disruptions are no longer theoretical scenarios. Insurance premiums are rising, coverage is being restricted, and credit terms are changing. Transitional risks—CO₂ pricing, regulation, technological change—can devalue assets and overturn investment decisions.

In future, all of this must be recorded, evaluated, and disclosed in a structured manner.

 

Why 2026 is the operational year

Those who have to report in 2027 cannot start in 2027.

Reliable data collection, especially for Scope 3 emissions, takes time. IT systems must be adapted, internal control mechanisms established, responsibilities defined, and auditors involved at an early stage. Scenario analyses must be integrated into budgeting and investment processes.

Experience from previous waves of regulation shows that companies that start too late produce formal compliance without strategic substance—or expensive retrofits under time pressure.

CSRD does not require cosmetic metrics, but rather consistent, verifiable information. This means processes, not presentations.

 

Are CFOs prepared?

Many companies have established ESG teams. However, there is a gap between reporting and integration. The decisive factor is whether climate risks are already being taken into account in the following areas:

– Investment calculations and discounted cash flow models
– Location decisions
– Insurance and financing costs
– Risk management and internal control systems
– Executive board and supervisory board reporting

If climate risks are reported but not taken into account in capital allocation, implementation remains superficial.

 

Conclusio

The regulatory postponement of the CSRD does not delay economic reality. Climate risks are already affecting cash flows, valuations, and capital costs.

For many companies, 2027 is the first formal reporting year. However, 2026 is the crucial implementation year. CFOs who do not invest in systems, processes, and integration now run the risk of being regulatory compliant but strategically unprepared.

The question is not whether reporting takes place, but whether climate risks have actually been incorporated into financial management.

Century rains on the Iberian Peninsula

Century rains on the Iberian Peninsula

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Parts of Portugal and Spain were recently hit by exceptionally heavy rainfall. In some regions, more than 150 to 250 millimeters of rain fell within 24 to 48 hours. Locally, values were measured that are statistically considered a "100-year event." Roads were flooded, rail connections were interrupted, agricultural land was damaged, and thousands of households were temporarily without power.

"Once-in-a-century rainfall" does not mean that such an event occurs only once per century. It refers to an annual probability of occurrence of around one percent, based on historical climate data. These probabilities shift as temperatures rise.

 

Why heavy rainfall is increasing

The physical basis is clear: for every degree Celsius of warming, the atmosphere can store around seven percent more water vapor. Since the beginning of industrialization, Europe has warmed by around 2 degrees—faster than the global average. This significantly increases the potential for intense precipitation events.

According to climate research, the Mediterranean region is considered a hotspot. At the same time, the Mediterranean Sea is warming at an above-average rate. Warmer water means more evaporation, more moisture in the air, and, in the case of unstable weather conditions, more energy for heavy rainfall.

There is also a structural effect: after long periods of drought, soils are often hardened and less able to absorb water. In urban areas, large areas are sealed. The result is flash floods, even if the absolute amount of rainfall is not historically unprecedented.

 

Specific effects:

The European climate service Copernicus shows that the intensity of heavy rainfall in southern Europe has increased in recent decades, even though total annual rainfall varies from region to region or is even declining. The pattern is: less consistent rainfall, more extremes.

Rainfall of over 200 millimeters within two days corresponds to more than a third of the average annual rainfall in some regions.
Damage caused by flooding is already one of the most expensive natural hazards in Europe.
Insured losses due to extreme weather in Europe run into the billions in some years.

For Portugal and Spain, this means that prolonged periods of drought alternate with isolated extreme events. Water shortages and flooding are no longer opposites, but part of the same system.

 

Climate adaptation as a location factor

The real question is not whether such events will happen again, but whether infrastructure, urban planning, and financing systems are prepared for them.

Many drainage systems are based on climate data from the 20th century. Roads, tunnels, and power grids were designed for different load profiles. As extreme events become more frequent, maintenance and insurance costs rise. At the same time, pressure on public budgets is growing.

Climate adaptation is therefore not a marginal issue. It is becoming a business and economic necessity. Retention areas, sponge city concepts, renaturation of river courses, and modern early warning systems are not ecological luxury projects, but risk management.

 

Conclusio

The once-in-a-century rainfall in Portugal and Spain shows that extreme weather is becoming less of an exception and more of a predictable factor. Historical climate data is no longer sufficient as the sole basis for decision-making. Climate adaptation is becoming an economic necessity for countries, cities, and companies. Those who fail to factor risks into their pricing structures will pay the price in the future through damage, higher insurance premiums, and declining location attractiveness.

 

Image: Symbolic image (AI-generated)

2 gigawatts from the desert – What the Al Dhafra solar project really shows

2 gigawatts from the desert – What the Al Dhafra solar project really shows

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With its commissioning in November 2023, Al Dhafra Solar PV in Abu Dhabi will be officially connected to the grid.
With 2 gigawatts of installed capacity at a single location, it is considered the largest single-site solar plant in the world.

But size alone is not the whole story. What matters is how the project is progressing—technically, economically, and strategically.

 

The hard facts

Capacity: 2 GW (AC)
Modules: around 4 million bifacial solar modules
Area: approx. 20 square kilometers of desert land
Supply: around 160,000 households
CO₂ savings: approx. 2.4 million tons per year
Tender price: ~1.32 US cents per kWh (world record level at the time of the bid)

Participants include Masdar, TAQA, EDF Renewables, and Jinko Power.

 

How is the project running operationally?

After more than a year of full-capacity operation, three key findings have emerged:

Scaling works—if the conditions are right

Extremely high solar radiation
Low precipitation
Large, contiguous areas
Centralized energy policy

This allows for a maximum full-load hours interpretation compared to Europe. While European solar parks often achieve 1,000–1,200 full-load hours, the potential in Abu Dhabi is significantly higher.

This significantly reduces electricity production costs.

 

Double-sided solar modules Modules pay off

The modules used utilize direct and reflected radiation from the bright desert sand.
This measurably increases yields, especially in arid regions.

Challenge: Dust and sand deposits.
Solution: Automated cleaning and maintenance systems.

The project shows that desert conditions are not a disadvantage—they are predictable.

 

The prize is not a PR stunt

1.32 US cents/kWh was not a theoretical value, but the result of a competitive tender.
This was made possible by:

Very favorable financing costs
Government purchase guarantees
Massive economies of scale
Favorable EPC structures

This is industrial policy strategy, not NGO rhetoric.

 

What does this mean globally?

Al Dhafra is a signal in three directions:

Solar energy is no longer a niche topic.
2 GW corresponds to the scale of conventional large-scale power plants.
Oil-producing countries are seriously diversifying.
The United Arab Emirates is positioning itself as an exporter of green electricity and, in the future, green hydrogen.
Europe is losing momentum.
While approvals are often debated for years in the EU, gigawatt projects are being realized within a few years in the Middle East.

 

Critical assessment

Of course, solar power remains volatile.
Without storage or flexible grid infrastructure, a 2 GW park is not a base load power plant.

The strategic question is therefore:
Will large-scale storage, hydrogen projects, or hybrid power plant solutions follow?

The UAE is already working on this integration.

 

Conclusio

The Al Dhafra solar project is not a symbolic project.
It is industrial proof that utility-scale solar can be cheaper than fossil fuel alternatives—when capital, land, and political clarity come together.

2 gigawatts from the desert is less of an ecological story than an economic one.

And that is precisely why the project is so relevant.

 

Photo: Masdar

Earthworms – The silent architects of our future

Earthworms – The silent architects of our future

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When we talk about climate protection, we think of wind turbines, solar panels, and carbon footprints. Hardly anyone talks about earthworms—yet they are a key part of the infrastructure.yet they are a key part of the infrastructure.

 

Soil structure instead of concrete logic

Earthworms dig permanent tunnel systems in the soil. These increase:

Water infiltration
Aeration
Root growth
Microbiological activity

Soil with a high earthworm density can absorb many times more water than compacted farmland. This is climate adaptation at the biological level.

 

Humus formation as a climate factor

Earthworms pull organic material into deeper soil layers and mix it with mineral components. Their excrement—known as worm humus aggregates—is particularly stable.

This means:

Long-term carbon storage instead of rapid CO₂ release.
Soil is one of Europe's largest carbon stores. Earthworms are active managers of this store.

 

Productivity without artificial fertilizers

In healthy soils, earthworms naturally increase nutrient availability. Studies show significant yield increases with high worm density.

This reduces dependence on synthetic fertilizers, whose production is energy-intensive and geopolitically sensitive.

 

Indicator of system health

Where pesticides, monocultures, and heavy machinery dominate, earthworms disappear.


It is an early warning sign of soil degradation.

 

Biomass & Distribution

There are over 7,000 described species worldwide.
In fertile soils, there can be 100–400 earthworms per square meter.
The biomass of earthworms can be 1–5 tons per hectare —more than the above-ground biomass of many wildlife species.

This is not a marginal quantity. This is dominant soil fauna.

 

Impact on earnings

A large meta-analysis (van Groenigen et al., Scientific Reports, 2014) shows:

On average, +25% higher plant production
+23% higher above-ground biomass
Particularly strong in soils with low nutrient availability

This is relevant in terms of agricultural economics.

 

Water infiltration & flood protection

Studies show:

Earthworm burrows increase water infiltration by a factor of 2 to 10.
Soils with high worm density significantly reduce surface runoff.
This can significantly reduce local erosion.

In times of heavy rainfall, this is direct climate adaptation.

 

The uncomfortable reality


However, they are living ecosystems.

Earthworms are not a romantic metaphor for nature.
They are a factor in efficiency, a climate buffer, and a driver of productivity.

When we talk about sustainable agriculture, we should talk less about output and more about soil life.

Because without earthworms, there is no resilience