We continue to contribute both to EFRAG and the IFRS Foundation, as they advance in addressing sustainability reporting standards. Lately, we have focused to changes to their respective structures, governance and due processes. In specific, we shared our:
The EFRAG Project Task Force on European sustainability reporting standards (PTF-ESRS) made public the working paper ‘Climate standard prototype’, which will further develop to a draft standard. This working paper is made publicly available for transparency purposes and is not submitted to public consultation at this stage.
The European Commission (EC) adopted a Sustainable Finance Package. Specifically:
The EC intends to issue up to 250 billion euros green bonds starting October, as part of the NextGeneration EU recovery instrument. The fund will deliver 800 billion euros to support EU’s recovery from pandemic, 250 of them will be delivered in green bonds. For the green bond issuance, the EC adopted a Green Bond framework which is in line with the principles established by the International Capital Market Association.
BlackRock published a study on the integration of ESG factors in the supervision of banks. The report states that, despite the efforts made by banks and supervisors, integration of ESG indicators within risk management and business strategies should be accelerated. The NGOs Change Finance and Reclaim Finance were critical towards this study. In their views, the involvement of BlackRock in coal, gas, and oil industry could slow down or derail the EC from achieving the objectives of the Paris Agreement.
The PTF-ESRS has kicked off their technical work to develop EU sustainability reporting standards. The PTF-ESRS is organised in clusters, which are currently scoping, researching, documenting and drafting the very first version of the standards. The PTF-ESRS aims to have pre-exposure draft version ready by mid-October.
To this end, EFRAG calls for experts to join Working Groups and provide input on the draft sustainability reporting standards being developed.
The EU Platform on Sustainable Finance called for feedback on the preliminary recommendations for the EU Taxonomy technical screening criteria by 24 September. The report presented a first set of priority economic activities and draft recommendations for associated substantial contribution and do no significant harm technical screening criteria. These are related to the remaining four environmental objectives: water, circular economy, pollution prevention, and biodiversity/ecosystems.
Economic and Finance Ministers (ECOFIN) held a public deliberation on the EC’s Sustainable Finance Package on 13 July. After the EC’s presentation, Member States shared their views on the proposals. Indicatively:
Over the summer, the EU Platform on Sustainable Finance presented a report on Social Taxonomy that aims to define activities substantially contributing to social objectives. Also, the Platform issued a report on Taxonomy extension options linked to environmental objectives. The report investigates ways to support the transition in the whole economy. It further clarifies activities that are significantly harmful to environmental sustainability and those activities that have no significant impact. This is to support the transition of significantly harmful activities to a ‘greener’ level.
Five Member States – Austria, Denmark, Luxembourg, Spain, and Germany – signed a joint letter asking the EC to keep out nuclear energy from the Taxonomy. Those countries consider it as harmful and deeply criticised the JRC’s report on the topic. They stated that it failed to address the residual nuclear risk, the question related to nuclear waste, and, finally, they raised doubts on the expertise of the scientific committees who drafted the report itself.
Several MEPs sent a letter to the EC President von der Leyen and 13 Commissioners in view of the delayed EC’s legislative proposal on Sustainable Corporate Governance. They insisted on the inclusion of the European Parliament key demands laid out in its legislative own-initiative resolution. These pertain to the scope of the future Directive, extending the due diligence obligation to all risks along the entire value chain, proportionality and prioritisation, and liability.
President Von der Leyen received a second letter from the Presidents of EPP, S&D, Renew, GreensEFA and the Left urging to ensure the EC proposal takes the EP’s views into account.
The College of Commissioners indicatively plans to discuss Sustainable Corporate Governance initiative on 27 October 2021.
Leading NGOs have published a briefing with key recommendations to help clarify directors’ responsibilities to oversee sustainability. NGOs urge to reflect their recommendations in the legislation that should apply to all companies and in particular those whose business activities are linked to significant sustainability risks and impacts.
IOSCO announced that it plans to consider endorsing the future sustainability reporting standards to be issued by the ISSB at the IFRS Foundation.
They noted the ISSB should consider how the common global baseline of standards might be adopted, applied or otherwise utilised in different jurisdictions.
The IFRS Foundation accepted proposals from countries to host the International Sustainability Standards Board (ISSB) until the end of August.
The following countries announced they had submitted bids to host the ISSB:
ACCA, together with Chartered Accountants Australia and New Zealand (CA ANZ), released a report “Ethics for sustainable AI adoption: connecting AI and ESG”. The study: i) shows the interlinkages between the implementation of Artificial Intelligence (AI) and ESG objectives ii) sets nine recommendations on this matter.
The Financial Reporting Council (FRC) Lab published its latest project report: Reporting on risks, uncertainties, opportunities and scenarios. It outlines what investors expect from corporate reporting on risks, uncertainties, opportunities and the use of scenarios. It also provides several practical examples of corporate reporting that better meet investors’ needs. Finally, it includes high-level insight into how investors would like reporting on resilience to develop.
The Financial Reporting Council (FRC) reviewed how a sample of companies and Limited Liability Partnerships (LLPs) had complied with the new SECR requirements, identified examples of emerging good practice and outlined its expectations for future reporting.
Read moreThis curated content was brought to you by Vita Ramanauskaité, Accountancy Europe senior policy advisor since 2015. You can send her tips by email, follow her on Twitter and connect with her on LinkedIn.