19 June 2020
The UN-Convened Net-Zero Asset Owner Alliance (AOA), representing $4.75 trillion in assets and many of Europe’s largest pension funds and insurance companies, warmly welcomes the review of the EU’s Non-Financial Reporting Directive (NFRD).
AOA members have publicly committed at the CEO level to transitioning their investment portfolios to have net-zero greenhouse gas emissions by 2050. To fulfil these commitments, AOA members will require standardized and comparable greenhouse gas emissions related data from corporations. The review of the NFRD provides an opportunity to address the lack of clarity and comparability of climate change related disclosures that prevails today.
AOA members, wish to draw the attention the following non-financial reporting needs to support their net zero commitments:
- The basing of corporate climate disclosure requirements on existing frameworks and standards, with particular reference to the Taskforce on Climate-Related Financial Disclosures (TCFD) and the EU Taxonomy. As globally diversified investors, the development of a consistent global framework is essential to increase the transparency and comparability of corporate reporting. Thus, it is important that an EU-focused standard looks to promote a globally consistent approach. The standard should apply to all large companies as defined by the EU Accounting Directive.
- Ensuring that reporting provides standardized and mandatory sector-specific Key Performance Indicators and forward-looking metrics. For greenhouse gas (GHG) emissions this should include: emission scope (1, 2, 3); scope 3 separated by upstream/downstream; also separated by GHG; split of emissions in estimated/measured/assured; and the degree of alignment of the company’s business model with a Paris-compliant 1.5°C scenario. Forward-looking targets covering absolute GHG emissions as well as GHG-intensities (e.g. GHG emission intensity planned in 5 and 10 years) would enable AOA members to chart their pathways and investment decisions to realize net zero commitments.
- Consistency between EU reporting requirements and regulatory initiatives improves data comparability and reduces costs for users and preparers of climate related disclosures. Investors’ ability to assess and report climate-related issues hinges on standardised inputs from companies. Disclosure requirements for financial market participants under the Sustainable Finance Disclosure Regulation (SFDR) should align with the proposed revision to the NFRD. Consistency between the revised NFRD, the SFRD and the EU taxonomy regulation will ensure more comparable data and reduce costs for all market participants.
- Climate related disclosures should be in companies annual report reporting or in mainstream financial reports for non-listed companies. The XBRL (eXtensible Business Reporting Language) is, as a freely available and global framework for exchanging business information, the recommended format to increase the transparency and accessibility of the reported information.
- Once developed and consulted on, the proposed EU Non-Financial Reporting standard should be implemented through appropriate legislation to ensure consistent implementation across the 27 EU member states.
AOA investor members and the PRI have submitted a full response to the NFRD consultation, which provides further details on the points set out above.
About the UN-convened Net-Zero Asset Owner Alliance
The United Nations-convened Net-Zero Asset Owner Alliance (AOA) is a leading group of pension funds and insurance companies committed to reducing their portfolio emissions to net zero by 2050.
As of 18 June, the 26 Alliance members include Alecta, Allianz, AMF, Aviva, AXA, CalPERS, Caisse des Dépôts, La Caisse de dépôt et placement du Québec (CDPQ), the Church of England Commissioners, CNP, Danica Pension, ERAFP, Folksam Group, FRR, Generali, KENFO, MP Pension, Munich Re, Nordea Life, Munich Re, Pension Danmark, PFA, SCOR, Storebrand, SwissRe, Wespath and Zurich.
The AOA is convened by Finance Initiative of the UN Environment Programme and the Principles for Responsible Investment, with support from WWF and Mission 2020.