NBIM, investor bodies oppose EU plans to change financial analysis in sustainability reports

Norges Bank Investment Management (NBIM) and the Dutch Federation of Pension Funds are among those asking the EU to rethink a plan to reduce what companies must tell investors about the financial implications of their sustainability disclosures.

The European Commission closed a consultation on proposed changes to the European Sustainability Reporting Standards (ESRS) on Wednesday, which include a series of tweaks to the way firms must report their ‘anticipated financial effects’.

It wants to introduce more carve-outs for such information, and delay the need to provide quantitative information until 2030.

The consultation received nearly 500 responses.

Among them was one from NBIM, which warned the Commission against allowing companies covered by the Corporate Sustainability Reporting Directive to omit information about anticipated financial effects if they deem it to be commercially sensitive.

“In practice, this could allow undertakings to withhold the specific figures quantifying their exposure to climate-related physical and transition risks,” said NBIM.

“This is precisely the information investors need to assess financial resilience,” it argued.

The Norwegian wealth fund suggested that the Commission should adopt the same as the global ISSB standards, which is to limit provisions around commercially-sensitive information to opportunity-related disclosures – banning their use for risk-related information.

“An undertaking could invoke it, for example, to protect plans to profit from a proprietary green technology,” explained NBIM.

Meanwhile, the Dutch Federation of Pension Funds, the European Sustainable Investment Forum, the Principles for Responsible Investment, the Institutional Investor Group on Climate Change, and the European Federation of Financial Analysts Societies issued a joint statement on the future of the ESRS.

They too raised concerns about the Commission’s plan.

“Quantitative and qualitative disclosures on anticipated financial effects are a central component of credible and decision-useful sustainability reporting,” the group wrote.

“They help users connect sustainability information with financial statements, assess financial materiality and make informed capital allocation decisions.”

Ethos Foundation also raised concerns about the planned provisions and delays around anticipated financial effects in its response.

The body, which represents more than 250 Swiss pension funds, described the carve-outs as “intrinsically subjective”, “difficult to control”, “entirely self-assessed” and “unverifiable”.

Likewise, the Dutch Fund and Asset Management Association suggested that the delay of quantitative disclosures until 2030 prompted questions about “whether the needs of financial institutions have been sufficiently balanced” with the need to make the regime simpler for portfolio companies.