An informal stakeholder group of investors, finance industry groups, and NGOs has set out ways to improve the reporting by businesses of environmental, social and governance (ESG) information, saying the world is “at a crossroads” for building a sustainable recovery from the coronavirus pandemic.
In a joint letter, the group urges the European Commission to require more companies to disclose data, as well as to implement minimum mandatory requirements that are comparable with global standards of reporting.
EFAMA, ACCA, Accountancy Europe, Association of German Banks (BdB), CDSB, Frank Bold, IIGCC, Schroders, ShareAction and WWF jointly issued a statement responding to the European Commission’s upcoming revision to the Non-Financial Reporting Directive (NFRD).
The NFRD currently requires large institutions such as banks and insurance firms, as well as publicly-listed companies with more than 500 employees, to report a range of data that could impact their sustainability over time.
“The current Covid-19 crisis puts the world at a crossroads with important choices to be made on the best ways to come out of the crisis and improve resilience from an economic, social, and environmental perspective,” says the group.
The group says that as economies recover, it is even more important for the private and the public sectors to work together on policy priorities for governments.
“That is why we support a sustainable recovery, including the necessary focus on social issues and the implementation of the European Green Deal with its goal of climate neutrality by 2050. We see the revision of the Non-Financial Reporting Directive (NFRD) as an important element of achieving this.”
The EU launched the feedback initiative after finding that NFRD was not requiring enough detail, left much to the discretion of reporting companies, and targeted a limited pool of companies.
The group’s seven recommendations include expanding the scope of reporting beyond large listed companies, developing a minimum set of reporting requirements including sector specific requirements, and making non-financial information publicly available in their annual management report.
It also emphasises finding an international solution to reporting challenges. “We need to bear in mind that challenges such as the worldwide climate crisis requires global efforts and solutions,” says the group, adding that “any EU proposal for future NFI standards should ensure comparability and compatibility at global level as companies need to comply by a broadly recognised reporting standard to be able to meet information needs of stakeholders in a global market”.
BNP Paribas AM and Candriam have also confirmed their support for the letter, while not being part of the informal group itself. Other firms, such as GRI, provider of the world standards for sustainability reporting, and ratings agency S&P have also issued their own responses to the consultation.
At the time the EC launched its consultation for NFRD, Valdis Dombrovskis, executive vice-president to the EC for An Economy that Works for People, said that the transformation to a carbon-neutral economy meant that people “need more information from the companies they are investing in”.
“As things stand today, there is currently a sustainability reporting gap that is hampering progress towards a sustainable financial system. The needs of investors for corporate sustainability information are growing faster than any improvements in company reporting,” he said.
The EU’s executive Commission is expected to propose a revised sustainable finance strategy by the end of the year.
