Eurosif says new ESG disclosure rules provide ‘too much information to investors’

RI network tells EU it has ‘doubts as to the usefulness of the indicators’ across investor portfolios

The European Sustainable Investment Forum (Eurosif) has come out against new ESG reporting rules being proposed by the European Commission (EC).

In a submission delivered this week, Eurosif described the mooted disclosure regime as providing “little context and too much information to investors”. Moreover, the body claimed that in many instances, the data underpinning the disclosures “is currently either not available or not reliable enough to come with quantitative metrics”.

Under draft proposals for entity-level disclosure by asset managers and other financial groups, the Commission has set out 32 mandatory indicators on the adverse impact of investments across environmental and social dimensions. These range from core metrics such as emissions and energy efficiency data, to more granular information such as volume of untreated waste water and non-recycled waste produced.

The EC have also proposed a second and third grouping of additional climate and social indicators for voluntary reporting.

The proposals – which are scheduled to enter into force from March 2021 – set out technical requirements for compliance with the EU’s sustainable disclosure regime for the financial sector, one of the three legislative proposals introduced under the EU Sustainable Finance Action Plan in 2018.

In its comments, Eurosif said that a “standardised and quantitative” approach would result in too much data, “which makes the analysis of which impacts to prioritise and focus on more difficult”. The network said it had “doubts as to the usefulness of the indicators” across investment portfolios. 

Instead, disclosure should be focused on “the policies, approach, investment strategies and philosophy of the financial market participant”, said Eurosif. The body has proposed “a reduced set of mandatory indicators” with the remaining indicators either becoming voluntary or mandatory at a later date.

Accompanying analysis by Eurosif concluded that data was only readily available for eight indicators, while the remaining 14 had only partial or no data coverage at all. 

To address the data gap, Eurosif said that robust disclosures had to be made at “entity-level” or by companies themselves. The topic is being addressed separately by the EC as it overhauls rules governing EU-wide ‘non-financial’ corporate reporting. Many, including the European Central Bank and fund body EFAMA, have called on regulators to establish a public ‘hub’ which would house such information.

 The concerns expressed by Eurosif are echoed in a separate submission by AMIC – the buy-side of the International Capital Market Association. Not only will the proposals give “little added value to investors”, claimed AMIC, but regulators seem to be “dismissing the issue of data availability” which it described as concerning.

Instead, EU regulators “seem to rely on the existence of ESG data providers as a justification for mandatory granular reporting,” it said.  

The submission from Eurosif comes days after newly-appointed Executive Director Victor van Hoorn formally began his tenure. Van Hoorn joined the responsible investing network from PR and lobbying firm Hume Brophy, where he was Head of Financial Services in Brussels.