• Register
Return to: Home > News > EU Commission proposes to broadened EFRAG's remit to sustainable issues

EU Commission proposes to broadened EFRAG's remit to sustainable issues

The European Commission has unveiled its strategy for a financial system that supports the EU's climate and sustainable development agenda, which shall see the remit of the European Financial Reporting Advisory Group (EFRAG) broadened.

One of the 10 actions included in the plan is to strengthening sustainability disclosure and accounting rule-making.

This will be done through a fitness check of the EU legislation on public corporate reporting, including the Non-Financial Information Directive, as previously reported by The Accountant. It will include the evaluation of sustainability reporting requirements and the prospects for digitalised reporting. The Commission will launch a public consultation on this in Q1 2018. The conclusions of the fitness check will be published by Q2 2019 and will inform any future legislative proposals to be adopted by the Commission.

The Commission also announced it would revised the guidelines on non-financial information by Q2 to provide further guidance to companies which would align them with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures.

Further to this, a European Corporate Reporting Lab (ECRL) will be established as part of the EFRAG in an effort to develop best practices for corporate reporting.

This would enable companies and investors to share best practices on sustainability reporting and environmental accounting within this forum. EFRAG described the establishment of the ECRL as “an opportunity to bring stakeholders together to foster innovation […] at a time when the reporting landscape is changing rapidly.”

The European Commission is also requesting that EFRAG assess the impact of new and revised IFRSs on sustainable investments. EFRAG has supported this, commenting: “If the Commission asks us to broaden our investigation then of course we stand ready to do so.”

The Commission action plan aims to generate the  € 180bn of additional investments per year needed to achieve the EU's 2030 targets agreed in the Paris Agreement, including a 40% cut in greenhouse gas emissions.

The Paris Agreement, which was implemented in December 2015, was the first legally binding global climate deal which was adopted by 195 countries to avoid the impact of climate change by attempting to limit global warming to below 2°C above pre-industrial levels.

Following the recommendations set out by the High-Level Expert Group on sustainable finance (HLEG), the European Commission has set out a roadmap to increase the role of finance in achieving a well-performing economy that also delivers on environmental and social goals.

The action plan on sustainable finance is part of the Capital Markets Union's efforts to connect finance with the specific needs of the European economy to the benefit of the planet and society. It is also intended to aid the implementation of the goals of the Paris Agreement and the EU's agenda for sustainable development.

Key features of the Action Plan

The HLEG was appointed in 2016 by the European Commission to establish a comprehensive set of recommendations for the financial sector to support the transition to a low-carbon economy.

Acting upon the HLEG’s final report, which was published in January 2018 and presented eight key action points it considered to be essential for meaningful action, the European Commission has proposed an EU strategy on sustainable finance for further work and upcoming actions covering relevant actors in the financial system.

Beyond disclosures and accounting measure, other key features from the action plan include:

  • Establishing a common language for sustainable finance, to define what is sustainable and identify areas where sustainable investment can make the biggest impact;
  • Creating EU labels for green financial products on the basis of an EU classification system;
  • Clarifying the duty of asset managers and institutional investors to take sustainability into account in the investment process and enhance disclosure requirements;
  • Requiring insurance and investment firms to advise clients on the basis of their preferences on sustainability; and
  • Incorporating sustainability in prudential requirements. The Commission will explore the feasibility of recalibrating capital requirements for banks for sustainable investments, when it is justified from a risk perspective, while ensuring that financial stability is safeguarded.

Re-orienting private capital to more sustainable investments requires a comprehensive rethinking of how financial system works. This is necessary if the EU is to develop more sustainable economic growth, ensure the stability of the financial system, and foster more transparency and long-termism in the economy.

Frans Timmermans, first vice-president of the European Commission, commented: "Moving to a greener and more sustainable economy is good for job creation, good for people, and good for the planet. Our proposals will allow investors and individual citizens to make a positive choice so that their money is used more responsibly and supports sustainability."

Valdis Dombrovskis, vice-president responsible for financial stability, financial services and capital markets union said: "Only with the help of the financial sector can we fill the annual €180bn funding gap to reach our climate and energy targets. This will help to support a sustainable future for generations to come."

 

By Joe Pickard

Top Content

    Accountancy Europe: the winner takes it all

    Jonathan Minter spoke to Olivier Boutellis-Taft, chief executive officer at Accountancy Europe, about how technology could change the industry, and how training needs to keep up to enable the profession to develop

    read more

    Embracing global technology trends

    Accountancy Europe’s Digital Day 2018 found the European accounting profession looking to tackle the challenges presented by new technologies head on. Jonathan Minter reports from the day

    read more

    IMA Conference: automation of the audit

    At the annual conference of the Institute of Management Accountants (IMA) in Indianapolis, Deloitte partner Alex Smith gave a presentation on digital transformation in the profession. Joe Pickard spoke to Smith following the presentation to find out more about his views on the future of audit

    read more

    IMA Conference: technology and the human effect

    The annual conference of the Institute of Management Accountants (IMA) took place in Indianapolis this year. Members of the profession gathered to hear the latest from the institute and other market players, covering some of the challenges and opportunities the profession faces.

    read more

    The Caribbean: a digital paradise

    The ICAC hosted its 36th annual conference in June this year – very much looking to the future following a tough 2017 for the Caribbean. Jonathan Minter spoke with chief executive officer Misha Lobban Clarke

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.