EU pushes 6,000 banks, corporates and insurers on TCFD disclosure

‘Most companies are likely to conclude that climate is a material issue’, says Commission as it updates Non-Financial Reporting Directive

The recommendations of the Task-Force on Climate-related Financial Disclosures (TCFD) have been woven into the European Commission’s regulatory guidance on disclosure for banks, corporates and insurance companies.
Published today, the Guidelines on Reporting Climate-related Information fulfil the Commission’s 2018 pledge to update the Non-Financial Reporting Directive (NFRD) as part of its commitments under the Action Plan on Financing Sustainable Growth.
How the work of the TCFD – created as a ‘market solution’, not a regulatory one – could be aligned with the guidelines was a key focus of the Commission’s Technical Expert Group on Sustainable Finance’s (TEG), a group of 35 market participants and hundreds of experts and observers, that were tasked with advising the Commission on its big sustainability push. The TEG delivered its initial findings in a report to the Commission in January. 
The Commission’s latest guidance builds on that report and a subsequent consultation on it with the market that ended in March.
It will supplement existing 2017 guidance on the NFRD. Each of the 11 corporate disclosure recommendations made by the TCFD have been allocated to an existing disclosure requirement within the NFRD, covering five areas: Business Model, Policies and Due Diligence Processes, Outcomes, Principle Risks and their Management, and Key Performance Indicators.
“Given the systemic and pervasive impacts of climate change, most companies under the scope of the Directive are likely to conclude that climate is a material issue”, states the Commission in the new guidance. “Companies that conclude that climate is not a material issue are advised to consider making a statement to that effect, explaining how that conclusion has been reached.”NFRD applies to listed companies with over 500 employees, meaning some 6000 companies are currently subject to the rules – although the guidance itself is ‘non-binding’ and “does not create new legal obligations”.
In addition to the TCFD, the guidelines have been updated to “take particular account” of standards and frameworks devised by the likes of the Global Reporting Initiative (GRI), CDP, the Climate Disclosures Standards Board (CDSB), the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Council (IIRC), and the EU Eco-Management and Audit Scheme (EMAS).
Key Performance Indicators – another focus area for the TEG’s report – are discussed in the new guidance through a climate lens, with businesses being encouraged to “consider using indicators to support their other climate-related disclosures”.
The guidance explores how companies could present KPIs on greenhouse gas emissions, energy, physical climate risks, products and services and green finance.
The Commission acknowledges in the guide that that “methodologies and best practice in the field of climate-related reporting are evolving fast”, and therefore recognises that “a flexible approach is necessary”.
“The European approach to climate-related disclosure – we consider – brings additional value to the great work done by the TCFD”, Jose Luis Blasco Vazquez, TEG member and Global Sustainability Director at Acciona, told RI, while Valdis Dombrovskis, Vice-President of the Commission and head of the Financial Stability, Financial Services and Capital Markets Union said the guidelines “will help companies to disclose the impact of the climate change on their business as well as the impact of their activities on climate and therefore enable investors make more informed investment decisions”.