Through its new European Green Deal, the European Commission is putting sustainability at the heart of Europe’s real economy and financial system. Europe’s leaders are reinforcing this ambition by looking to ensure a green recovery from COVID-19.
Driving sustainable investments is critical to meeting Europe's goals. The Non-Financial Reporting Directive (NFRD) helps achieve this. The NFRD is the main regulation of the European Union (EU) obliging companies to report environmental, social and governance (ESG) information. Applying to the 6,000 biggest companies in Europe, the law sets out the minimum level of climate and environmental information that major European companies should include in their annual reports.
Companies and investors can help strengthen the directive and its impact by responding to the European Commission’s public consultation. Here are CDP Europe’s five key recommendations for the new law:
1- Require companies to disclose long-term plans and targets to align with the latest climate and environmental science and outline how they will achieve climate and resource neutrality.
2- Specify that ‘environmental matters’ include, at minimum, climate change mitigation and adaptation, water security, land use and commodity-driven deforestation. The new EU taxonomy, which defines sustainable business activities, could be referenced in support.
3- Apply the TCFD’s recommendations to a broader perspective of natural capital and make companies include disclosures on climate- and natural capital-related governance as part of their corporate governance statement and non-financial statement.
4- Include TCFD-recommended disclosures on strategy, risk management, metrics, and targets, to make the links between non-financial and financial information stronger.
5- Oblige companies to report the mandatory information in their annual reports, by removing the exemption currently allowing non-financial statements to be issued separately.
Please click here to see CDP's full response.