Norges Bank Investment Management (NBIM), which runs Norway’s 1 trillion-dollar Government Pension Fund Global, has suggested the creation of a “central repository of data” for sustainability disclosures.
The suggestion comes in its response to the on-going ‘Fitness Check’ of the EU framework for corporate reporting.
The Fitness Check, one of the measures included in the European Commission’s Sustainable Action Plan, started with a consultation which closed in July with 338 responses.
It will continue throughout mid-2019 when a staff working document will be published. A high-level event is today being hosted by the EC in Brussels to gather further input and evidence.
A key part of the Fitness Check is the review of the Non-Financial Reporting Directive, which introduced new areas to be covered by annual reports: environmental, social, human rights and anti-corruption matters.
The NFR Directive left flexibility as to what standards could be used to disclose such information but mandated the EC to issue non-binding guidelines to help companies comply with the new reporting requirements.
NBIM said in its response that the sustainability reporting landscape is fragmented with about 400 mandatory or voluntary reporting regulations, guidelines and standards – a number which emerged when the Task Force on Climate-related Financial Disclosures (TCFD) was in development.
“In the future, we would hope to see a central repository of data used by all companies and easily accessible to investors. Harmonising disclosures through such mechanisms would provide companies with an effective way to disclose sustainability information and enable investors to compare information over time,” NBIM said in its response, signed off by Carine Smith Ihenacho, Chief Corporate Governance Officer.
NBIM has also suggested expanding the scope of the directive: “Reporting on material sustainability matters should be a requirement for all companies above a certain size, regardless of whether they are listed or not. This ensures a level playing field and does not disincentivise companies from going public.”
As part of the Action Plan the EC has committed to updating the non-binding guidelines, particularly on climate information, aiming at aligning them with the recommendations of the TCFD by mid-2019, with the assistance of its sustainable finance Technical Expert Group.
Meanwhile, a coalition of investors coordinated by CDP has today published a statement calling on EU policymakers to implement a “fit-for purpose framework of corporate reporting” in line with the TCFD recommendations.The initial signatories are: ACTIAM; Arkitekternes Pensionskasse; AXA Investment Managers; Candriam; Caisse des Dépôts; MIROVA; Pensionskassen for Jordbrugsakademikere og Dyrlæger; PKA A/S; Robeco and RobecoSAM; Sampension; and Schroders.
Asked about whether the TCFD recommendations should be made compulsory, Lise Moret, Head of ESG Quantitative Solutions at AXA IM, told RI that some key requirements should be part of “a binding package”.
“But we would recommend not being too prescriptive; that would mean leaving some leeway to investors to interpret the ESG information provided by companies,” Moret said.
A second statement of 20 NGOs, coordinated by the public interest company law group Frank Bold, has also been launched today. It calls for EU policymakers to establish minimum legal requirements for corporate sustainability reporting.
Signatories include ClientEarth, ShareAction, WWF and Global Witness. The NGOs are calling on the EC to “specify baseline mandatory requirements and metrics.”
They stated: “A common standardised reporting framework is a prerequisite to allowing investors to fulfil their existing and upcoming legal obligations to undertake ESG assessments.”
ClientEarth also participated in the Fitness Check consultation. The environmental law group raised concerns about the EC’s proposed method of incorporating the TCFD recommendations in the EU public reporting framework by virtue of the non-binding guidelines.
ClientEarth also took issue with the International Accounting Standards Board (IASB), due to its “failure to engage closely to with the TCFD process and to consider relevant implications for its accounting standards and guidance”.
RI reported on IASB’s current approach to ESG disclosures last month:
ClientEarth said the IASB has been reluctant to address the integration of more holistic and forward-looking information into financial reporting practices.
“In our view this is hindering core pieces of the EU’s policy agenda and ultimately failing to provide investors and other stakeholders with the information they need to assess company position and performance in an efficient and comparable manner.”
Meanwhile CDP and the Climate Disclosure Standards Board have published a study which reveals slow progress in the implementation of the NFR Directive among a sample of 500 companies.