Featured Product

    ESAs Respond to Proposal to Review Non-Financial Reporting Directive

    June 11, 2020

    ESAs published their individual responses, along with a joint letter, to the EC consultation on the review of Non-Financial Reporting Directive (NFRD). The EC consultation aimed to collect the stakeholder views on possible revisions to the provisions of the NFRD. The principal focus of this consultation, the comment period for which ended on June 11, 2020, was on the possible options for such revisions. EBA welcomes this consultation and agrees with the need to revise the NFRD in an effort to meet the demand for relevant, reliable and, comparable company disclosures on non-financial matters. In addition, ESAs highlight the need to increase standardization by setting out mandatory requirements and to expand the scope of companies covered by the NFRD, in a proportionate way.

    The three ESAs (EBA, EIOPA, and ESMA) have submitted a joint letter from their Chairs, highlighting certain key messages, which are of particular importance for the future of the non-financial reporting regime in Europe. ESAs agree that there is a need to revise the NFRD, as the demand for relevant, reliable, and comparable company disclosure on non-financial matters goes well beyond the current legislative requirements. A central element of such a revision would be to introduce a higher level of standardization of the disclosure requirements, which companies must apply when preparing their non-financial information. In the short term, it is necessary to pursue a European standardization, which should, however, be compatible with the aim of achieving international standardization in the medium term. ESAs consider it would be important to include the detailed disclosure standards in regulatory or implementing technical standards, setting out mandatory, rather than voluntary, requirements. The absence of mandatory reporting requirements, and the resulting application of a variety of national, regional, and global disclosure frameworks, lowers the comparability between companies’ disclosures and impedes assurance regarding those disclosures. Introducing mandatory disclosure standards would be the best way to promote a change toward more relevant, reliable, and comparable disclosures.

    ESAs suggest that the development of regulatory or implementing technical standards should be placed with a public body. In that context, ESAs could play a leading role in the necessary standard-setting work, having each received strengthened legislative mandates on environmental, social, and governance (ESG) matters in the recent ESA review. The ESAs are already tasked with developing regulatory and implementing technical standards on disclosure of sustainability‐related topics under their remits and would as such ensure the necessary consistency across the different disclosure standards in the sustainable finance area. In addition, ESAs would contribute to a consistent application of the disclosure standards thanks to the ability to issue guidelines, opinions, and Q&As. Furthermore, the ESAs would leverage on a sound due process based on extensive stakeholder engagement via public consultations, regular interactions with the statutory stakeholder groups and ad-hoc outreach activities as well as cooperation with the International Platform for Sustainable Finance and with other public authorities such as the European Environmental Agency and the European Union Agency for Fundamental Rights.

    Further to standardization, the scope of companies to be covered is another central aspect of the NFRD revision. ESAs suggest that now would be a suitable time to expand the scope to create transparency on non-financial matters to a larger group of companies, thus also providing information on a wider scale to facilitate financial market participants in discharging their disclosure obligations under the Disclosure Regulation. The expansion should, however, be done in a proportionate way to avoid undue administrative burden on smaller companies and reflect the need to consider a simplified disclosure standard for SMEs. Finally, ESAs highlight the importance of ensuring consistency of the NFRD with other pieces of legislation in the sustainable finance area, notably the Disclosure Regulation, the Taxonomy Regulation, and the prudential disclosure requirements foreseen, for example, in the CRR for credit institutions. This is relevant both when revising the NFRD and when developing the related Level 2 disclosure standards.

     

    Related Links

    Keywords: Europe, EU, Banking, Insurance, Securities, Non-Financial Reporting, Reporting, Reporting, Disclosures, CRR, Climate Change Risk, ESG, Sustainable Finance, Proportionality, NFRD, ESAs, EBA, ESMA, EIOPA

    Featured Experts
    Related Articles
    News

    BIS Paper Studies Impact of Fintech Lending on Small Businesses in US

    The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.

    September 26, 2022 WebPage Regulatory News
    News

    UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks

    The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).

    September 26, 2022 WebPage Regulatory News
    News

    EBA Launches EU-Wide Transparency Exercise in 2022

    The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.

    September 23, 2022 WebPage Regulatory News
    News

    SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks

    The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."

    September 22, 2022 WebPage Regulatory News
    News

    EC Rule Lists Advanced Economies for Market Risk Capital Calculations

    The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.

    September 21, 2022 WebPage Regulatory News
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8521