Companies operating in Europe must be required to disclose detailed climate information, EU lawmakers said in a letter to the bloc’s executive arm as they seek to reverse a planned easing of ESG reporting rules.
(Bloomberg) — Companies operating in Europe must be required to disclose detailed climate information, EU lawmakers said in a letter to the bloc’s executive arm as they seek to reverse a planned easing of ESG reporting rules.
“The mandatory or justified nature of the standards is the key to reliable, shared and undistorted information,” lawmakers from four political parties said in a June 29 letter seen by Bloomberg. “It is therefore necessary to reintroduce the mandatory nature of data points relating to climate, regardless of the outcome of the companies’ materiality analysis.”
Previous voluntary standards have led to significant and arbitrary differences in climate reports, distorting prices in the capital markets and undermining confidence in environmental pledges, according to the letter, which was addressed to Commission President Ursula von der Leyen, Executive Vice-President Valdis Dombrovskis and Mairead McGuinness, commissioner for financial services.
Earlier this month the European Commission released its long-awaited proposal for how to implement the Corporate Sustainability Reporting Directive, setting off a wave of criticism among financial institutions and investors. They argue the plan won’t provide them with the data they need to meet environmental, social and governance investing rules.
In its proposal for corporate reporting rules, the EU Commission gives companies considerable freedom to decide which sustainability issues are material enough to report on, marking a departure from disclosure standards recommended by the European Financial Reporting Advisory Group. The Commission said its proposal reflects a desire not to overload companies with too great a reporting burden.
But the approach has left the finance industry “marooned without data,” according to Lauma Kalns-Timans and Ekaterina Naumova, ESG analysts at Berenberg. Aleksandra Palinska, executive director of the European Sustainable Investment Forum (Eurosif), which represents ESG investors in the bloc, said the commission is ignoring data concerns that had been “expressed for years.”
The European Commission’s proposal is now in a consultation process that runs until July 7. After that, it goes back to the European Parliament and then the EU Council for consideration. Implementation is due in 2024.
In their letter, the EU lawmakers also criticized the commission’s plan to make voluntary the disclosure of a number of other sustainability-related data. While information will be subject to limited audits, “there is a great risk that certain data points, which are necessary for financial operators and various stakeholders, will slip through the auditors’ assessment,” they wrote.
Signing the letter were lawmakers from Renew Europe, European Green Party, The Left group, and the Alliance of Socialists and Democrats, including Pascal Durand, the member of Parliament responsible for overseeing CSRD’s passage.
(Updates to add detail on political parties signing letter in final paragraph.)
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