European Commission
International Platform on Sustainable Disclosure - European Commission publishes report on status of ESG disclosures - 4 November 2021
The European Commission’s International Platform on Sustainable Finance (IPSF) has published its report on trends in ESG disclosures across the 17 IPSF jurisdictions, Brazil and the US. The report provides an overview of the current state of ESG disclosures, summarising emerging global trends and identifying key gaps that need to be addressed.
The report argues that more work needs to be done to facilitate the pricing-in of sustainability impacts and risks in investing, and to enable such decisions to take account of an entity’s impacts on society and the environment. It notes that entity-level ESG disclosure policy measures (e.g. for companies or banks) are widely implemented, whilst regulations targeting financial products and services are still in their infancy in most jurisdictions. Moreover, the report states that small- and medium-sized enterprises (SMEs) represent the bulk of economic activity in various sectors and the corresponding sustainability risks and impacts, yet they are mostly exempted from mandatory ESG disclosures.
The materiality definition, mandatory reporting requirements, scope and content of most disclosure policies are not yet commensurate with the global sustainability challenges. Most notably, specific climate-related disclosures are still voluntary in most jurisdictions, and other key risks, such as biodiversity, are not covered in most disclosure frameworks.
Chapter 6 of the report provides a detailed overview of all ESG disclosure measures across the relevant jurisdictions.
IPSF report: State and trends of ESG disclosure policy measures across IPSF jurisdictions, Brazil, and the US
Webpage
International Platform on Sustainable Finance - European Commission publishes instruction report and issues call for feedback - 4 November 2021
The IPSF has published its Instruction Report (the Report) on Common Ground Taxonomy (CGT) with respect to climate change mitigation. The CGT is the result of the working group established by the EU and China in July 2020 to assess the existing taxonomies for environmentally sustainable activities and to identify commonalities and differences.
The Report covers the first phase of the CGT: a detailed analysis of the EU and China taxonomies. The CGT analysed 80 activities across six sectors in the International Standard Industrial Classification of All Economic Activities (ISIC): (i) agriculture, forestry and fishing; (ii) manufacturing; (iii) electricity, gas, steam and air conditioning supply; (iv) water supply, sewage, waste management and remediation activities; (v) construction; and (vi) transportation and storage.
The Report identifies areas for future work, including additional sectors and environmental work, transition considerations, and new areas of alignment in existing activities. It also highlights the need to include more jurisdictions as their taxonomies are finalised.
The ISPF has issued a call for feedback through an online questionnaire.
European Commission (IPSF) Common Ground Taxonomy Package: Instruction Report
Webpage
Common Ground Taxonomy Table
Webpage
Call for feedback
Webpage
European Securities and Markets Authority
Annual reports of listed companies - ESMA publishes enforcement priorities - 29 October 2021
The European Securities and Markets Authority (ESMA) has published its annual statement on “Common Enforcement Priorities” for financial statements prepared in accordance with International Financial Reporting Standards (IFRS). The areas covered include the assessment of the long-term impact of the COVID-19 pandemic and the recovery phase; climate-related matters; and enhanced transparency regarding the measurement of expected credit loss (ECL). These areas “will be considered by national enforcers when monitoring and assessing the 2021 annual financial reports of listed companies.”
Issuers are also reminded to make the necessary preparations to fulfil the disclosure requirements foreseen by Article 8 of the Taxonomy Regulation ((EU) 2020/852).
ESMA will collect data on how European listed entities have applied the recommendations in the statement and will communicate its findings in its report on the enforcement activities of 2022, to be published in spring 2023.
Statement on European common enforcement priorities for 2021 annual financial reports of listed companies
Press release
Network for Greening the Financial System
Sustainable finance - NGFS publishes Glasgow Declaration - 3 November 2021
The Network for Greening the Financial System (NGFS) has published the ‘NGFS Glasgow Declaration: Committed to Action’ (the Declaration), in which NGFS members reiterate their willingness to contribute to the global response required to meet the objectives of the Paris Agreement. The NGFS was launched in 2017 as a group of central banks and supervisors that are willing to share best practices, contribute to the development of environment and climate risk management in the financial sector, and mobilise mainstream finance to support the transition toward a sustainable economy. The Declaration forms part of NGFS’s contribution to COP26, together with NGFS’s progress reports on global supervisory and central bank climate scenario exercises and on the Guide for Supervisors, as previously reported in this Bulletin.
In the Declaration, NGFS members commit to deepen, expand and strengthen their efforts towards greening the financial system, to improve the resilience of the financial system to climate-related and environmental risks, and to encourage the scaling up of the financial flows needed to support the transition towards a sustainable economy. In the coming years, the NGFS will, among other things, publish guidelines on Task Force on Climate-related Financial Disclosures (TCFD)-aligned reporting for central banks, further its work to bridge climate-related gaps thanks to the finalisation of its data repository, keep on conducting analytical work on how climate change might be taken into account in the conduct of monetary policy, and continue to enrich its climate scenarios.
The press release notes that many NGFS members are publishing an individual pledge or strategy in the light of COP26 and that some have recently released documents detailing their domestic agenda, or plan to do so soon.
NGFS Glasgow Declaration: Committed to Action
Webpage
Press release
International Financial Reporting Standards Foundation
Sustainable finance - IFRS Foundation announces establishment of the International Sustainability Standards Board and publication of prototype disclosure requirements - 3 November 2021
The International Financial Reporting Standards Foundation (IFRS Foundation) has published a press release announcing three significant developments:
- the establishment of a new International Sustainability Standards Board (ISSB) to develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ demand for reporting;
- consolidation of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) into the ISSB by June 2022; and
- the publication of prototype climate and general disclosure requirements developed by the Technical Readiness Working Group which was formed to carry out preparatory work for the ISSB.
The UK government has confirmed the ISSB standards will form a core component of the Sustainability Disclosure Requirements framework.
Video
Speech by Erkki Liikanen, Chair of the IFRS Foundation Trustees: Global sustainability disclosure standards for the financial market
Feedback statement: IFRS Foundation Trustees’ Feedback Statement on proposed amendments to the IFRS Foundation’s Constitution
New webpage
See the Banking and Finance section for an item on the publication by the Institute of International Finance of a template relating to TCFD-aligned climate-related disclosures.
See the Asset Management section below for an item on IOSCO’s final report on its recommendations on sustainability-related practices in asset management.
