Eurosif welcomes European legislation on non-financial information disclosure
Eurosif (the European Sustainable and Responsible Investment Forum) has welcomed the results of the vote by the European Parliament on legislation requiring the disclosure of non-financial and diversity information by certain large European companies.
The legislation was approved by the EU Parliament last week and is expected to be formally approved by the Council later this month.
As Eurosif stressed, it will be the first time that information related to environmental, social, employee, human rights, corruption and bribery matters will be explicitly required to be disclosed in companies’ management reports.
“The new legislation is a clear improvement on that which is currently in place, as it expands the areas to be covered in the disclosure and implements a mandatory “comply or explain” approach,” Eurosif said.
“It sends a clear signal to companies that non-financial information can be material to their performance and competitiveness at a time when a growing number of investors are taking environmental, social and governance (ESG) information into account in their investment decisions.”
However, Eurosif said it was disappointed that the text of the legislation was significantly weakened during the course of trilogue negotiations. Despite flexibility embedded in the initial proposal from the European Commission and efforts by the Legal Affairs (JURI) Committee of the European Parliament to strengthen it even further, some Member States and business organisations were not as supportive.
In particular, Eurosif regrets that the legislation:
• Will only apply to large “public interest enterprises”.
• Does not contain any meaningful assurance measures.
• Allows companies (under certain circumstances) to delay the publication of the disclosure of non-financial information by up to six months following the financial data for the same time period.
• Does not prescribe the use of specific key performance indicators (KPIs), which would allow investors to compare companies more easily.
François Passant, executive director of Eurosif, commented: “Having harmonised European regulation regarding non-financial information disclosure has been a long-standing request of the sustainable and responsible investment community.
“Today’s vote by the European Parliament is historic from that respect. While the text of the legislation is probably the best compromise that could be reached at this stage, it falls short in a number of areas important to sustainable and responsible investors, most notably scope and assurance. Eurosif will therefore continue to engage with policy-makers on these and work with other market forces to progress reporting practices.”
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