ESG Disclosures: A New Regulatory Landscape #S2E6

FinTalk by VERMEG

Welcome to FinTalk, the leading podcast in Financial Services that addresses the most pressing topics in the FinTech and RegTech.
In this episode, our host Jawad Akhtar talks with Mark Davies, Partner at Element22, to shed light on ESG data and the European Union regulations shaping the banking industry. They discuss the importance of sustainability reporting, EU Taxonomy, data collection strategies, climate risks, and how financial institutions can adapt to regulatory changes while ensuring quality data.

This episode of FinTalk covers:

- The intricacies of EU sustainability reporting, specifically NFRD and CSRD, and their impact on ESG reporting in banking.

- Navigating essential metrics such as Green Asset Ratio (GAR) and Banking Book Taxonomy Alignment Ratio (BTAR), and understanding the role of EU Taxonomy in sustainability.

- Strategies for data collection to address challenges and enhance data quality in sustainability reporting.

- The significance of geographic data and climate information in analysing climate risks for the banking industry.

- How financial institutions can stay updated with evolving regulations and leverage third-party tools for compliance and reporting.
Episode highlights:

“CSRD will actually expand its scope slightly, well, significantly actually, rather than just the largest exchange listed corporates being in scope for NFRD, under CSRD, the expectation is that approximately 50,000 corporates across Europe will be covered by that, based on having more than 500 employees and a number of different financial metrics in terms of the size of the organization. But in short, the green asset ratio depends on data that's being published by those organizations.”

- Mark Davies.

“The EBA have published a really simple summary, two-pager I think it is, that explains the requirements for Pillar 3 disclosures around ESG and the expectations around that. Actually, it's an excellent document in the sense that it brings it up to a level that anyone can read and understand. I would begin there, understand those requirements. The key deadlines, there's a date of December 23, so the end of this year, for reporting the Green Asset Ratio, and the middle of 2024 for the BTAR ratio, banking book taxonomy alignment ratio”

- Mark Davies.

“Clearly the Green Asset Ratio, I'd say because the deadlines are actually slightly earlier than the BTAR ratio deadlines, the information that's required to satisfy the GAR is probably the first place to begin. That would include capturing information from NFRD statements for large lending and financing customers. That would be a logical place to begin. The next piece of the puzzle I would say is then probably to start to think about some of the climate specific information. Having a good understanding of your three sectors is going to be critical because that will drive which aspects of the EU Taxonomy Compass and therefore the detail around your sustainability activities.”

- Mark Davies.

Links & references:

VERMEG:

https://www.vermeg.com/

https://www.linkedin.com/company/vermeg/

Jawad Akhtar:

https://www.linkedin.com/in/jawad-akhtar-313562b/

Mark Davies:

https://www.linkedin.com/in/markdaviesdata

Element22 Link:

https://element-22.com/