NFRD revision has started

On 30 January 2020, the European Commission published an Inception Impact Assessment related to the Revision of the Non-Financial reporting Directive.

The publication of this document constitutes the start of the forthcoming legislative journey to the final text expected in Q4 this year. It informs the public of the intention of the Commission with an overview on the calendar and offers the possibility to the public to be somehow implicated in this process.

Even though this Directive doesn’t impact directly neither funds nor their management companies, this revision is one of the crucial pieces of the sustainable finance puzzle alongside to the Taxonomy. Indeed, current legislative projects underway such as the integration for sustainable risks in UCITS, AIFMD and MiFID as well as the new Regulation on sustainability‐related disclosures in the financial services sector will consume massively those non-financial data.

The revision aims to address its current weaknesses:

  • insufficient comparable and reliable information
  • opposite interest about the information disclosed by the issuers and the one expected by the investors
  • accessibility to these information
  • companies not reporting non-financial information.

This lack of minimum standardisation of the information may compromise the chance of success of the Green Deal as well as the achievement of the Capital Market Union. A right balance costs/benefits is key to protect the viability of economic actors that despite being not in scope of this regulation should be indirectly economically impacted due to their connections with largest companies.

The European Commission has contracted 2 studies in the context of this revision: “Study on the non-financial reporting Directive and

  • “Sustainability Ratings and Research to provide additional advices and
  • “Sustainability Ratings and Research to provide additional advices and already led several consultations including the Technical Expert Group on Sustainable Finance.

In last December, ESMA in its findings on potential undue short-term pressures in securities markets also recommended to consider appropriate amendments to the NFRD to establish principles for high quality non-financial information along with a limited set of specific disclosure requirements.

The feedback on this inception Impact assessment is expected by the European Commission until 27 February 2020 (midnight Brussels time).

The European Commission will open further an online public consultation in the first quarter of 2020.

The outcome of those works will determine the choice of the legal basis of this revision.

Source document: EC Inception Impact Assessment