EU “close” to making corporate ESG disclosure mandatory – Eurosif

Expect a directive on mandatory ESG disclosure, says Christensen

The European Commission (EC), the executive arm of the European Union (EU), is edging closer to making environmental, social and governance (ESG) disclosures mandatory for companies, according to the head of the European Sustainable Investment Forum (Eurosif), the SRI lobby group.

Matt Christensen, Eurosif’s Executive Director, told RI: “It’s really on the cusp.” He cited “very positive signals” from officials in the Internal Markets directorate at the Commission that is handling the dossier.

EU Internal Markets Commissioner Michel Barnier has already brought in measures like the Alternative Investment Fund Mangers (AIFM) directive and curbs to bank bonuses in a relatively short space of time.

Christensen said mandatory ESG disclosure would fit with this, as “part of the capital market structure” the EU is putting into place in the wake of the global financial crisis. Also underway is an EU consultation on corporate governance in financial institutions.
Eurosif said it saw less resistance to ESG reporting from business lobby groups, claiming that they realise increased disclosure is now part of the landscape.In its own response to the Commission’s consultation on Non-Financial Reporting, which closed on January 28, Eurosif also calls for institutional investors to comply with a similar reporting regime by disclosing the extent to which ESG factors are integrated in their investment decisions.
In support of mandatory ESG reporting for companies, Eurosif’s submission points to existing non-financial disclosure regimes in Denmark, France, Sweden and the UK as well as requirements for the extractives industry under the US’s Dodd-Frank Act and the Johannesburg Stock Exchange’s requirement for annual integrated financial/ESG reports. Christensen said: “The European Commission needs to use their role in a meaningful way to create clarity for investors and companies.”

Eurosif says it is working with EFAMA, the European Fund and Asset Management Association, to collaborate on future initiatives such as the framing of language as a means to bring more clarity about ESG reporting to the financial services sector.

EFAMA’s internal responsible investment working group aims to put forward its own position paper on RI shortly, Christensen said.