June 20, 2019
Published: International Accounting Bulletin
The European Commission has published new guidelines on corporate climate-related information reporting, as part of its Sustainable Finance Action Plan. The guidelines will provide companies with practical recommendations on how to better report the impact that their activities are having on the climate as well as the impact of climate change on their business.
Although not legally binding, the new guidelines are part of the Commission’s ongoing efforts to ensure that the financial sector – private capital – can play a critical role in transitioning to a climate-neutral economy and in funding investments at the scale required. They will provide guidance to around 6,000 EU-listed companies, banks and insurance companies that have to disclose non-financial information under the Non-Financial Reporting Directive. They are inspired by recent proposals by the Technical Expert Group on sustainable finance (TEG), and integrate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the G20’s Financial Stability Board.
The Commission also welcomed the publication of three new reports by the Technical Expert Group on sustainable finance, including key recommendations on the types of economic activities that can make a real contribution to climate change mitigation or adaptation (taxonomy).
– The first is a classification system – or taxonomy – for environmentally-sustainable economic activities. This aims to provide practical guidance for policy makers, industry and investors on how best to support and invest in economic activities that contribute to achieving a climate neutral economy.
– The second expert report on an EU Green Bond Standard recommends clear and comparable criteria for issuing green bonds. The Commission expects this to boost the green bond market allowing investors to scale up sustainable and green investment
– Finally, a third expert report on EU climate benchmarks and benchmarks’ ESG disclosures sets out the methodology and minimum technical requirements for indices that will enable investors to orient the choice of investors who wish to adopt a climate-conscious investment strategy, and address the risk of greenwashing.