ESMA issued a comment letter to EC, welcoming its proposal to update the non-binding guidelines on non-financial reporting with the introduction of a specific supplement addressing climate-related disclosures. ESMA made some recommendations on how the guidelines can be further developed to promote higher quality disclosures.
On February 20, 2019, EC consulted on update of the non-binding guidelines on non-financial reporting. ESMA recommends the EC to ensure that when reviewing the guidelines, an appropriate balance is achieved across requirements relating to the various non-financial matters, with the aim to avoid the issue that focus on a specific matter, such as climate change, detracts from attention to the necessary disclosures on the other non-financial matters. While generally supporting the proposals in the consultation document, ESMA would like to highlight the following key areas where the proposed approach to update the guidelines could be further improved:
- While ESMA welcomes the EC clarification on how the notion of materiality in the Non-Financial Reporting Directive (NFRD), as transposed into local law, should apply to climate-related disclosures, it believes that the clarifications included in the consultation would also be beneficial for the main text of the guidelines. Therefore, ESMA encourages EC to incorporate these clarifications into the existing section of the guidelines relating to material information.
- The consultation document proposes to structure the climate-related requirements into "Type 1" and "Type 2" disclosures, wherein Type 1 disclosures would represent more basic or minimum disclosures that issuers are expected to provide in all cases in which climate-related matters are material, while Type 2 disclosures would only be intended to provide more enhanced information. ESMA recommends expanding the disclosures that are currently proposed as Type 1 with some of the requirements that are currently only classified as Type 2 (detailed suggestions in this regard are proposed in the Annex to the comment letter). In addition, ESMA suggests considering the applicability of the proposed structure to the other disclosure requirements in the guidelines.
- ESMA, building on the enforcement experience of non-financial statements, highlights additional areas for improvement related to the NFRD. In its view, without an increase in the specificity of the requirements in the NFRD, any amendment to the guidelines, even if helpful, is unlikely to result in a significant shift toward more consistent and enforceable non-financial reporting.
Keywords: Europe, EU, Banking, Securities, Sustainable Finance, Non-Financial Reporting, Climate-Related Disclosures, Non-Binding Guidelines, EC, ESMA
Previous ArticleDNB Publishes Banking and Insurance Newsletters for March 2019
Next ArticleBoE Extends Notification Period for TPR Under Brexit
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.