/>iIn November 2024, the European Commission published two notices related to sustainability reporting which provide helpful guidance for companies and financial institutions that need to comply with the new sustainability requirements while ensuring that their reporting meets all requirements.
EU Commission Notice of 13 November 2024 (C/2024/6792)
This relates to the interpretation of multiple legal provisions in the context of sustainability reporting. The focus of this Notice No. 6792 is to explain and clarify the application of the relevant EU legislation for companies and financial institutions that have an obligation to disclose sustainability information.
The relevant legal acts for the sustainability reporting are: Directive 2013/34/EU (Accounting Directive), Directive 2006/43/EC (Audit Directive), Regulation (EU) No 537/2014 (Audit Regulation), Directive 2004/109/EC (Transparency Directive), Delegated Regulation (EU) 2023/2772 (first set of European Sustainability Reporting Standards, first ESRS delegated act), and Regulation (EU) 2019/2088 (Sustainable Finance Disclosures Regulation- SFDR).
Especially notable are the following sections:
- Section III which answers a wide range of FAQs, including those regarding the scope of and exemptions from sustainability reporting, which are to be disclosed under Articles 19a/29a of the Accounting Directive (individual and consolidated sustainability statement).
- Section IV which discusses the obligations of EU subsidiaries or EU branches under Article 40a of the Accounting Directive.
EU Commission Notice of 8 November 2024 (C/2024/6691)
This relates to the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act, which also contains guidelines and explanations on the interpretation and clarification of provisions relating to the disclosure obligation, but specifically the disclosure obligation under the EU Taxonomy Regulation. These provisions relate to the reporting of Taxonomy eligible and Taxonomy-aligned economic activities and assets.
The Disclosures Delegated Act under Article 8 of the EU Taxonomy Regulation sets out how companies and financial market participants must disclose their taxonomy-compliant activities and assets to ensure that they comply with the EU’s sustainable finance requirements. Unlike previous EU Commission notices, which mainly focused on non-financial companies, the purpose of Notice No. 6691 is, to provide financial companies with guidance (including FAQs) on reporting their KPIs under the delegated act on disclosure requirements (the Disclosures Delegated Act).
- The Notice covers the taxonomy-related assessment of risk exposures to individual (financial) companies in Section C.
- FAQ 15 (section E) concerns exposures of financial undertakings to regional governments and state-controlled entities in reference to Article 7(1) of the Disclosures Delegated Act.
- FAQ 34 (section F) addresses the relationship between annual review of the taxonomy alignment of exposure and the grandfathering clause in Article 7(5) of the Disclosures Delegated Act applicable to special purpose loans and certain environmentally sustainable bonds or debt securities.
- FAQ 57 (section G) deals with intragroup lending, stating that while intra-group transactions should be eliminated during the process of prudential consolidation in accordance with Section 1.1.1. Annex V DDA, intragroup transactions within in the accounting scope of consolidation should be treated as external transactions.
- FAQ 63 (section G) provides a tabular timeline for the disclosure of each of the templates included in Annex VI DDA, following the timing of the application of the underlying KPIs laid down in Article 10 of the Disclosures Delegated Act.
