THE CHALLENGES OF FIRM-WIDE ESG DISCLOSURES FOR FINANCIAL INSTITUTIONS
Financial institutions (FIs) are increasingly publishing environmental, social and governance (ESG)-related disclosures explaining their firm ESG strategy and plans for achieving that strategy across their business lines.
Many of these disclosures are mandated; for example, in the UK, FIs must consider their obligations under the Companies Act 2006 to publish a strategic report, and the Prudential Regulation Authority (PRA) requires FIs it regulates to publish a climate report in line with the recommendations from the Taskforce on Climate-related Financial Disclosures (TCFD). Asset managers are also required to publish a TCFD report by the Financial Conduct Authority (FCA). Now the publication of transition plans is also being encouraged. They too will likely be mandated at some point.
Similarly, in Europe the Corporate Sustainability Reporting Directive (CSRD) will significantly increase the existing sustainability reporting requirements for large companies (including FIs) under the Non-Financial Reporting Directive, and require them to publish a report on the impact of their corporate activities on the environment and on society. As in the UK, this will be layered over other obligations. In France, for example, FIs are already obliged to publish a plan in compliance with the country’s 2017 Duty of Vigilance to identify risks and prevent severe impacts on human rights and the environment.
Jul-Sep 2023 issue
Freshfields Bruckhaus Derringer LLP