EU consults on new ESG Disclosure Standards
The European Supervisory Authorities (ESAs) have published a consultation paper seeking input on proposed environmental, social and governance (ESG) disclosure standards for certain financial services providers and products.
The proposals would require the sustainability characteristics or objectives of financial market participants, advisers and products to be disclosed. EU-wide benchmarks for determining ‘sustainable’ activity would be used to classify entities and financial products. The proposals also includes making it mandatory to disclose key areas of adverse impacts, for example, greenhouse gas emissions.
The ESAs are also considering mandatory reporting templates for financial product ESG disclosures, although these would be developed and consulted on at a later date.
Standardising the methods and metrics for disclosing the environmental and social impact of potential investments is one step towards making ESG data more accessible and usable. However, the EU’s proposals don’t require the use of structured data for these disclosures, meaning the data would not be machine-readable, vastly reducing its comparability and accuracy.
Read more and access the consultation here. Input is welcome until 1 September 2020.
