The European Association of Co-operative Banks (EACB) welcomes the opportunity to comment on the Commission initiative to amend the requirements in the Non-Financial Reporting Directive. As a general comments the Association has answered to this consultation representing the point of view of cooperative banks of different sizes and geographical spread, some of which are already under the scope of the NFRD, bearing in mind the double perspective of our Members, at the same time users and preparers of non-financial reports. Given the limited flexibility of the questionnaire, some of the Associations’ answers are set in the middle, in particular on those questions that would not allow to express the differentiated positions expressed by our Members.
From the perspective of most of our members, there is significant room for improvement in the disclosure practices under the NFRD: the lack of comparability of non-financial information reported by companies and their limited reliability should be addressed in the context of the actions taken to improve the transition through a sustainable economy. Without data from their clients, financial institutions will not be able to assess their portfolios with regards to ESG performance.
To solve this gap of information we need a single European standard for all companies for reporting a harmonized set of non-financial information aligned with the technical screening criteria of the EU taxonomy. Existing disclosure frameworks of non-financial information, whether at EU level with the NFRD or at global level (TCFD, GRI etc) all predate, by definition, the sustainable finance action plan (SFAP) and the EU Green Deal. EFRAG could play an important role in setting such a standard, involving stakeholders, like relevant standards setter and professional associations, in the process: inclusiveness and pluralism should be guaranteed together with transparency in selecting the experts that will take part to the project task force. As representative of the co-operative banks the EACB express its willingness to be involved.
Some members of the EACB believe that the scope of the NFRD should not be extended to non-listed companies or banks and insurance companies with less than 500 employees. However, the majority of Members of the EACB believe that in principle all companies should provide NFI reporting. In line with the approach taken in Art. 3 and 36 of the Accounting directive 2013/34, a very differentiated framework should be developed for micro-companies, small companies, and for medium and larger companies, all based on a common methodology. We thus support the creation of a standard for smaller companies and micro-companies. For smaller companies, especially micro companies, NFRD reporting could in a first phase remain a voluntary exercise, and a phased approach should be envisaged to ensure that gradually they are able to produce the relevant data on a permanent basis.
Furthermore, digitalisation of non-financial disclosure could result in large benefits as far as accessibility of information is concerned. We strongly advocate for the creation of a centralized data register that would facilitate ESG disclosures and the access to relevant and reliable data at the EU level (ideally in a standardized form but also providing access to disaggregated raw data). Standardisation of reporting is a prerequisite to digitalisation and should be prioritized. In this respect the EACB calls the EU to take the lead to start to establish a/or support, based on existing solutions, a centralised electronic European ESG data register (see Key messages paper in annex). Data should be provided to users for free or at a reasonably affordable cost. Users would include financial institutions, universities, researchers, supervisory authorities, rating agencies, observers and all other relevant stakeholders. The availability of raw harmonized ESG data should be regarded as EU strategic infrastructure project to meet the EU sustainability objectives both under the Action Plan on Sustainable Finance and the EU Green Deal. The EU ESG data register would allow for comparability, increase transparency, lower barriers and costs, generate efficiency and attract new players. Especially when linked to taxonomy the database could provide a very valuable source of information to markets and policy makers alike.
Finally, EACB Members believe that companies reporting pursuant to the NFRD have difficulty in getting the information they need from business partners, including suppliers, in order to meet their disclosure requirements. Financial institutions cannot be entitled to disclose on the basis of data that the regulatory framework doesn’t allow them to retrieve from their clients. It would be extremely difficult for banks to take the responsibility to guarantee a consistent and complete reporting (e.g. scope 3 GHG emissions information). It is therefore necessary to defer the publication of non-financial reporting by financial institutions by 1 annual exercise after the reporting of non-financial companies. Moreover, it must be ensured that banks will not to be held responsible for not disclosing data that are not made available and sanctioned for non-compliance with the Disclosure Regulation and the Taxonomy Regulation. EACB members consider that EU authorities should look at establishing more realistic timelines for the actual application of the different provisions of the SFDR.
You can find more information in the annexes.
For further information or questions please contact:
Ms E. Bevilacqua (firstname.lastname@example.org)
Mr G. Betti (email@example.com)