10 June 2020

Non-Financial Reporting Directive Review: EBF response

General recommendations: Regulation instead of Directive; Consistency of disclosure requirements across EU legislation (alignment with EU Taxonomy Regulation, Disclosure Regulation, CRR2 Pillar 3 requirements, June 2019 EC Non-Binding Guidelines on Climate Reporting, ECB guidance.

What data is needed and for what purposes?

• Banks need robust, comparable and reliable data
• To  identify and assess sustainability risks in lending activities
• To comply  with the new disclosure obligations
• To steer portfolios towards the objectives PA and EGD

Who should report?

• All listed companies given the application of the taxonomy to all financial investments in the capital/financial market
• All large companies. The criteria for banks should be modified to include banks with more than 250 employees and more than 5 billion in total assets.
• Companies from sectors with a high transition risk (for example mining, carbon, smaller utilities ….for material risks (e.g. climate only), regardless of the size of the
• All remaining companies based on a simplified minimum reporting framework taking into account materiality, proportionality in a structured manner  and possible gradual implementation (sectors with high risks first).

What should be reported?

• More detailed requirements on environmental matters
• Clear link to taxonomy (Harmonized data collection  with a clear  nomenclature to allow automatization; data collection templates for each economic activity)
• Standardized scenario analysis following TCFD for large companies in polluting sectors
• Alignment of strategies with 2 degrees
• Number of Key KPIs aligned with the disclosure requirements that will be specified in the Delegated Act of the Taxonomy Regulation
• Gradually, associated revenues and expenses of eligible products or activities and the associated sustainable assets (both as a percentage of the total).
• Greater focus on information and data related to  societal aspects
• Governance issues as in TCFD

Need for EU central data register to facilitate disclosure

• EU to adopt strategic infrastructure project in  the context of European Green Deal dataspace
• EU to build or supports, based on existing solutions and infrastructure, a central European ESG data register that would:
• Collect periodically, with the help of new reading technologies, existing climate change mitigation and adaptation data of companies under the NFRD.
• Collect  other  available relevant information, ESG metrics and  relevant data points
• Interconnect the relevant EU and MS databases collecting ESG information (government, CB, statistical bodies)
• Enable  to upload information to the register  on a voluntary basis
• Data to be provided to users of non-financial information for free or at reasonable cost

EBF

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