ESG Reporting and Disclosure

Since the Paris Agreement signed in 2015, the European Union (EU) has been making strides to promote the transition towards a sustainable economy. The European Council presented in December 2019 the European Green Deal, which aims to promote a circular and sustainable economy, as well as to reduce the Union’s net emissions to zero in 2050.

ESG Reporting and Disclosure

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After the publication by the Council of the European Green Deal, a regulatory tsunami on transparency requirements in relation to climate risk and Environmental, Social and Governance risks (ESG) has taken place. The European Parliament (EP) and the Commission (EC) have published the Regulation on sustainability-related disclosures in the financial services sector (SFDR), the capital requirements regulation (CRR II), and the Taxonomy Regulation for sustainable investments, among others.

Executive summary

The SFDR, the CRR II, the Non-Financial Reporting Directive (NFRD) and the Taxonomy Regulation on sustainable investments, contain a number of disclosure requirements that entities and insurance companies must comply with in relation to climate risks and ESG risks. In relation with these requirements, the European Supervisory Authorities (ESAs) and the EC have published relevant documents on reporting and disclosure standards.

Main content

This Technical Note focuses on four main ESG reporting rules and guidelines (GL):

• EC GL on reporting climate-related information. These guidelines consist of a supplement to the existing guidelines on non-financial reporting. The GL Annex I develops the guidelines for banks and insurance companies.
• CP on draft ITS on Pillar 3 disclosures on ESG. This consultation paper by the EBA puts forward the tables, templates and instructions that institutions shall use in order to disclose relevant qualitative information and quantitative information related to ESG risks.
• Advice to the EC on disclosures under Article 8 Taxonomy Regulation. The EBA, the ESMA and the EIOPA issued an advice that puts forward its opinion on KPIs and related methodology for the disclosure on activities that are environmentally sustainable.
• Final Report on Joint RTS on ESG disclosure standards. The ESAs’ RTS aim to strengthen protection for end-investors by improving ESG disclosures to end-investors on the principal adverse impacts of investment decisions.

The purpose of this technical note is to clarify the ESG reporting requirements faced by companies and to present them in an executive manner.

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