Investor Groups Urge EU to Mandate Climate Transition Plan Disclosure to Back Up Net Zero Commitments

· Policy and Regulatory

 

Two leading sustainable investment industry groups, the European Sustainable Investment Forum (Eurosif) and the Principles for Responsible Investment (PRI) have sent letters to EU lawmakers urging that upcoming sustainability reporting rules include requirements for companies to disclose comprehensive information on their decarbonization plans to back up their net zero commitments.

In the letters, sent to the European Commission, the European Parliament, and the EU Council, the investor groups note that while an increasing number of companies have recently announced goals to achieve net zero emissions, investors often have difficulty in assessing the commitments, including determining if they are science-based or underpinned by credible climate scenarios.

In order to provide investors with the information needed to assess companies’ climate plans and to finance the net zero transition, Eurosif and the PRI call on the EU institutions to mandate robust disclosures around these issues in the upcoming Corporate Sustainable Reporting Directive (CSRD).

The CSRD, currently under development, is aimed as a major update to the current Non-Financial Reporting Directive (NFRD), the current EU sustainability reporting framework. The new rules will significantly expand the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000 currently, introduce more detailed reporting requirements, and require audited assurance of the information reported.

According to the Eurosif and PRI letter, the development of the CSRD “presents a unique opportunity” to bring needed transparency into companies’ net zero plans, stating that it is crucial that “CSRD mandates companies to prepare transition plans and disclose the scenarios used for these plans as well as the key assumptions underpinning these scenarios.”

The letter adds:

“A CSRD that does not contain robust, granular requirements around net-zero commitments would be a missed opportunity for the EU to future proof its sustainability reporting framework and equip investors with the tools they need to finance the net-zero transition.”

Click here to access the Eurosif and PRI letter.

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