Featured Product

    EC Seeks Views for CDR on Non-Financial Sustainability Disclosures

    July 28, 2020

    EC is seeking feedback for an initiative that would involve the development of a Commission Delegated Regulation (or CDR) on the sustainable taxonomy-related disclosures by undertakings reporting non-financial information. The objective of this initiative is to specify an appropriate set of rules for undertakings subject to the Non-Financial Reporting Directive (NFRD) to include in their non-financial statements, consolidated non-financial statements, or other relevant separate reports, information on how and to what extent their operations are associated with economic activities that qualify as environmentally sustainable under the EU Taxonomy. The feedback period on this initiative ends on September 08, 2020. EC plans to adopt the Delegated Regulation by the second quarter of 2021.

    The EU recently adopted the Taxonomy Regulation on the establishment of a framework that creates a classification system of environmentally sustainable economic activities (that is, EU taxonomy) to facilitate sustainable investment. The initiative for which EC is seeking feedback now complements the Taxonomy Regulation with a delegated act specifying the requirements for entities subject to NFRD to publish information on how and to what extent their activities are associated with the EU taxonomy; these entities that are subject to NFRD include large listed undertakings, large banks, and large insurance undertakings with more than 500 employees. The delegated act is distinct from two other delegated acts under the Taxonomy Regulation that set technical screening criteria for six environmental objectives and are to be adopted by December 31, 2020 and December 31, 2021. This delegated act will complement the ongoing revision of the NFRD and development of regulatory technical standards by ESAs under the regulation on sustainability-related disclosures in the financial services sector (that is, Disclosure Regulation). Together, these initiatives will interact to help undertakings, financial intermediaries, and end-investors enhance capital flows toward environmentally sustainable projects and activities in a consistent manner.

    The initiative, to which EC is now seeking feedback, will propose methodologies and indicators to help undertakings determine the extent to which their economic activities can be considered environmentally sustainable according to the EU taxonomy. More transparency about how undertakings’ activities are related to the EU taxonomy is necessary for financial market participants to design financial products and portfolios based on this information. Without this clarity, financial intermediaries and investors would not have a commonly accepted way of determining when an undertaking is truly green or making investments in that direction. This could result in some crucial data gaps that could hinder financing those activities considered to make a substantial contribution to the environmental objectives of EU. This represents an obstacle and source of additional costs not only for investors and financial market participants, but also for businesses that want to reorient their economic activities in line with sustainability objectives and attract capital from prospective green investors. Additionally, creating consistency for undertakings to assess their degree of alignment with the EU taxonomy would help improve coherence between the NFRD, Taxonomy Regulation, and Disclosure Regulation; enhance consistency of information disclosed by undertakings; and limit administrative burden on them.

    The Taxonomy Regulation already specifies that non-financial undertakings under the NFRD are legally obliged to disclose the proportion of their turnover derived from products or services associated with environmentally sustainable economic activities. The undertakings are also obliged to disclose the proportion of their total investments (CapEx) and expenditures (OpEx) related to assets or processes associated with environmentally sustainable economic activities. Through this exercise, it will be examined whether these indicators for non-financial undertakings under the NFRD should be further specified and whether different indicators for financial undertakings under the NFRD (that is, large banks and insurance companies) should be developed for that purpose. Based on the results of the analysis, the appropriate indicators would be set out in the delegated act, along with a methodology that would help undertakings to disclose information according to those indicators. In furtherance to this delegated act, if deemed necessary, additional EC guidance on the application and use of the disclosure requirements for companies according to the EU taxonomy may be considered.

     

    Related Links

    Comment Due Date: September 08, 2020

    Effective Date: June 2021 (planned)

    Keywords: Europe, EU, Banking, Insurance, ESG, Climate Change Risk, Sustainable Finance, Taxonomy Regulation, Disclosures, NFRD, Delegated Act, EC

    Featured Experts
    Related Articles
    News

    EBA Launches Stress Tests for Banks, Issues Other Updates

    The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.

    January 31, 2023 WebPage Regulatory News
    News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8700