In June 2018, the European Commission set up a Technical Expert Group on Sustainable Finance (TEG) to assist it in developing aspects of its Sustainable Finance Action Plan published in March 2018. One aspect is guidance to improve corporate disclosure of climate-related information that could be included in the European Commission’s guidelines on the Non-Financial Reporting Directive (NFRD). On January 10, 2019 the TEG published its first report on climate-related disclosures by companies. The report includes proposals for disclosing not just how climate change might influence the performance of a company, but also the impact of the company itself on climate change.
The NFRD applies to traded companies, banks and insurance companies with more than 500 employees. The proposed guidance contained in the report is intended to assist such companies in developing climate-related disclosures that comply with the NFRD and satisfy the June 2017 recommendations of the Task Force on Climate-related Financial Disclosures. Specific disclosures and guidance are set out for each of the five categories of the NFRD requirements: business model; policies and due diligence processes; outcomes; principal risks and their management; and key performance indicators.
The recommended disclosures are further differentiated based on companies’ exposure to climate change. The "general disclosures" or "Type 1" refer to information that companies should disclose. At a minimum, a company is expected to report certain disclosures, irrespective of the company’s own assessment. The ‘supplementary disclosures or ‘Type 2’ refer to information that companies should consider reporting on and depend on a company’s own assessment of impacts of climate change on its business and of its activity on climate change, carried out autonomously and in consultation with stakeholders.
Comments on the report are requested by February 1, 2019. The TEG will report to the European Commission on the responses but will not produce a revised version of the report. The TEG’s report will be taken into account when the European Commission updates the non-binding guidelines on non-financial disclosure that accompany the NFRD AND the European Commission intends to consult on an update of the NFRD guidelines prior to their planned adoption in June 2019.
(European Commission: Technical Expert Group on Sustainable Finance climate-related disclosures report, 10.01.19)
(European Commission: Technical Expert Group on Sustainable Finance climate-related disclosures report press release, 10.01.19)