EU to launch regulatory guidance on TCFD alignment for banks, corporates and insurers

Update to Non-Financial Reporting Directive as Technical Expert Group has its mandate extended

The European Commission is readying itself to launch regulatory guidance for banks, corporates and insurance companies on climate disclosure, and has extended the mandate of its Technical Expert Group on Sustainable Finance (TEG) for six months.
Next month, the Commission will publish an update to the non-binding guidelines of the Non-Financial Reporting Directive, as part of its Action Plan on Sustainable Finance. Further details on the guidance will be provided when it is launched, the Commission told RI, but it will offer advice on how large companies listed within the EU, as well as banks and insurance companies, can meet expectations around disclosure on climate-related information and alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The guidance is based on recommendations and reports delivered to the Commission by the disclosure sub-group of the TEG, which finished its work earlier this year.
The TEG is a group of around 30 market participants, and hundreds of experts and observers, that were tasked with advising the European Commission on four topics: low-carbon benchmarks, green bond standards, sustainability disclosure and the development of a classification system for business activities that support the fight against climate change (known as the taxonomy).

The TEG will present much of the rest of its findings in a major report to the Commission in the coming weeks. While the sub-group on disclosures completed its work earlier this year, the benchmarking group had a set-back in the spring when the European Parliament secured amendments to the legislative proposal that altered the TEG’s original mandate – and it is consequently still working on its recommendations.The green bond sub-group is the only one of the four whose work isn’t yet accompanied by a legislative proposal – instead, the sub-group’s job is to advise on what a future legislative proposal should look like. Substantial technical guidance on the taxonomy – the flagship initiative of the EU Action Plan on sustainable finance – will be published as part of next month’s report.

“Taxonomy will get to the heart of the industrial economy, rather than just focusing on niche ‘green’ aspects”

June’s report will see the taxonomy guidelines address 60 business activities, providing eligibility criteria for each. Nathan Fabian, who heads up the TEG and is Head of Responsible Investment at the PRI, told RI that the recommendations, which currently include sectors such as manufacturing, building, transport, “get to the heart of the industrial economy, rather than just focusing on niche ‘green’ aspects”.
The European Commission has extended the mandate of the TEG until December, RI can confirm. The group was supposed to finish its work this summer, but the Commission had given itself the option of extending its tenure for a further six months, which it has now done.
Once the TEG has presented its report to the Commission in June, it will be open to public consultation throughout the summer. Then the TEG will review market feedback and provide the Commission with a summary of key points in December, to inform the development of any associated regulation or guidance to the market.