European Commission reportedly weighing up options for stronger disclosure rules governing climate, biodiversity loss and pandemic risks.
Green corporate reporting rules that could see European firms having to disclose the risks they face from climate change, biodiversity loss, and pandemics, in addition to linking executive bonuses to carbon targets, are currently being weighed up by the EU Commission, according to reports. The Commission is expected to launch a consultation in the coming days looking at various options for strengthening corporate reporting requirements for listed companies, investors, banks and insurers, in a bid to combat financial risks posed by environmental factors such as climate change.
A draft of the consultation seen by Reuters yesterday indicates the Commission is seeking views on rules that would require firms to report on the risks posed to their business by climate change, the net zero transition and biodiversity loss, while highlighting in particular the environmental factors behind pandemic outbreaks such as the current coronavirus crisis. The draft document, which could lead to future legislative proposals, reportedly argues the escalating Covid-19 crisis demonstrates the huge economic risks associated with human activity and biodiversity loss, with the cause of the current pandemic having been widely blamed on the wildlife trade.
It points to habitat destruction and the changing climate as factors that increase the chances of disease transmission between animals and humans, and highlights the huge economic disruption the current pandemic has caused across the global economy and to companies’ bottom lines.
Regulatory and investor pressure has been ratcheting up on companies to strengthen their climate and environmental risk disclosure, with risk consultancy Verisk Maplecroft pointing to 2020 as a crunch year for climate risk reporting. The Investment Association, which represents investors with £7.7tr of assets under management, last month also set a three-year deadline for listed companies to explain how they plan to measure and manage climate risks and opportunities in their annual reports.
Under the EU’s Non-financial Reporting Directive, large European companies have since 2014 already been required to publish regular reports on the social and environmental impacts of their business activities. But with the Commission now seeking to ramp up the EU’s climate and environmental efforts via its proposed European Green Deal – which envisages a target to reach net zero emissions by 2050 – it is seeking to strengthen its existing corporate reporting requirements.
Source: Business Green
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