The European Commission Action Plan: An assessment of the reform areas for PRI signatories provides an overview of the area of reforms. Action 9 focuses on strengthening sustainability disclosure and accounting rule-making.

Key points

  • The Commission is launching a fitness check of EU legislation on public corporate reporting, including the Non-Financial and Diversity Information (NFI) Directive, to assess whether public reporting requirements for listed and non-listed companies are fit for purpose. It will include the evaluation of sustainability reporting requirements and the prospects for digitalised reporting.
  • The Commission will launch a public consultation on this in early 2018. The conclusions of the fitness check will be published by the second quarter of 2019 and will inform any future legislative proposals to be adopted by the Commission.
  • By that date, the Commission will revise the guidelines on non-financial information. Building on the metrics to be developed by the Commission technical expert group on sustainable finance, the revised guidelines should provide further guidance to companies on how to disclose climate-related information, in line with the Financial Stability Board’s Task Force on Climate-related Financial Disclosure (TCFD) and the climate-related metrics developed under the new classification system . Subsequently, the guidelines will be amended to include other environmental and social factors.
  • By the second half of 2018, a European Corporate Reporting Lab will be established as part of the European Financial Reporting Advisory Group (EFRAG). Its remit will be to promote innovation and the development of best practices in corporate reporting, such as environmental accounting. In this forum, companies and investors can share best practices on sustainability reporting, such as climate-related disclosure in line with the TCFD’s recommendations.
  • Asset managers and institutional investors would be requested to disclose how they consider sustainability factors in their strategy and investment decision making process, in particular regarding their exposures to climate change-related risks. This is part of the Commission’s legislative proposal set out in Action 7.
  • The Commission will request EFRAG, where appropriate, to assess the impact of new or revised international financial reporting standards (IFRS) on sustainable investments. The Commission will also ask EFRAG to explore accounting treatments that could offer potential alternatives to fair-value measurement for long-term investment portfolios of equity and equity-type instruments. By the end of 2018, the Commission will report, taking into account EFRAG current work, on the impact of IFRS 9 on long-term investments and explore improvements to the standard for the treatment of equity instruments.
  • Within the fitness check of EU legislation on public corporate reporting, the Commission will also evaluate relevant aspects of the International Accounting Standards Regulation. It will, in particular, explore how the IFRS adoption process can allow for specific adjustments to standards where they are not conducive to the European public good, e.g. where the standards could pose an obstacle to long-term investment objectives.


This part of the action plan seeks to strengthen corporate transparency. In the EU, listed companies are already required to disclose information that investors need to assess sustainability risks. The Commission published (non-binding) guidelines to help companies disclose this information in a consistent and comparable manner through the NFI Directive.

Metrics developed by the Commission to further guide companies on how to disclose climate risk information will be in line with the TCFD recommendations. The aim is to help investors measure how well companies are dealing with the risks and opportunities in the transition to a low-carbon economy. In addition, the Commission will conduct an evaluation of existing corporate reporting rules, to inform any future legislative proposals.

Apart from the links to the proposal on requiring asset managers and institutional investors to disclose how they use ESG factors in Action 7, the measures in Action 9 are non-legislative.

This action reflects concern that the current accounting rules are not conducive to sustainable investment decision-making. In particular, the European Parliament has raised concerns about the impact the new accounting standard on financial instruments (IFRS 9) might have on long-term investments. The Commission recognises the importance of ensuring that accounting standards do not directly or indirectly discourage sustainable and long-term investments. In this regard, consideration is needed about whether there could be more flexibility as concerns the endorsement of financial reporting standards wherever specific adjustments would be more conducive to long-term investment.

The Commission is institutionalising this dialogue through its technical expert group on sustainable finance to design metrics. This section of the action plan is contingent on progress in the development of an EU taxonomy, so the timelines may vary to those set out in the official plan.

The Commission has published an evaluation and fitness check roadmap relating to corporate public reporting8. The Commission notes the increased demand for public reporting on a broader range of topics, such as sustainability issues and long-term value creation.

Quality, reliable, timely and comparable ESG data is necessary for investment analysis. With more ESG data available, investors have a duty to incorporate ESG issues in their decision-making. Investors should also consider their own reporting processes.

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