The European Association of Co-operative Banks considers the work on climate-related disclosures as an important step and welcomes the possibility to comment on the Report of the European Commission about the updating of the non-binding guidelines of the non-financial Reporting Directive (NFRD).
The EACB recommends a gradual approach, starting with qualitative and forwarding looking information : there are still several open questions, starting with the development of the European taxonomy that it is still at its inception.
Hervé Guider, EACB General Manager, stated: "Co-operative banks call for an assessment of the current implementation first. Consistency with other financial information disclosed under other regulatory requirements shall be ensured. For co-operative banks it is of particular relevance the prudential framework".
The EACB would also like to highlight the need of a proportionated approach in particular due to current context of limited availability of information at acceptable costs (as the framework is being built). Thus it is recommended to reduce the detailed disclosure requirements proposed for Banks in Annex I. Proportionality in terms of activities disclosed shall be ensured, in particular considering the differences between wholesale banks type of business (larger amounts and fewer transactions) and the retail banks ‘one (smaller amounts and more frequent transactions). Additionally further guidance, templates and testing will be necessary. For example taking into account the national and local climate-risk specificities or scenarios that may differ widely among countries and regions. We recommend the Sector guidance to be further developed to facilitate the users.
Moreover in relation with the KPIs, the EACB draws attention to the provision of scope 3 information regarding “all indirect emissions along a value chain”. Reconstructing the climate impacts of the entire value chain on the environment is likely to be a challenge, as it would have to rely on climate information provided by companies. This may be in certain instances very difficult. Indeed since entities, like SMEs in particular (typically clients of local and regional co-operative banks), do not publish the requested information; it would be extremely difficult to operationalize. If this “chain of information” would not be available for credit institutions, Banks could not have a whole vision of scope 3 disclosures and, consequently, take the responsibility to guarantee a consistent and complete report.