Good afternoon everyone,
Thank you very much for the opportunity to listen because I’ve been able to listen to all of the contributions that have already been made.
And I want to thank everyone who’s taken part in today’s important event, because what we’re trying to do is really push the boundaries. Europe wants to lead on sustainable finance. Today’s event is pulling together in a coherent way the next steps towards sustainability.
So we’ve had lots of high-profile speakers and I think what this is testament to is that sustainability is no longer on the margins but has moved to the mainstream, and it has done so at lightning speed.
It is now at the heart of policy, business and finance.
Ultimately, sustainable investment is about making the right choices. And to make the right choices, you need good information.
If you look at the pandemic and the recovery, this is an opportunity to build back a better European economy and society. And in order for us to do that, we need complete, comparable and reliable sustainability information from companies.
The opposite is poor, incomplete sustainability information and this could create systemic risks for our financial system.
And that is the reason we have proposed the Corporate Sustainability Reporting Directive.
There are two key elements to our proposal: it focuses on clarity and coherence.
To deal with the clarity part first.
Markets and companies need greater clarity.
If you look at the landscape today, companies can use any reporting standards, or all standards, or none. In a sense, it is a bit like a pick and mix. It is not clear and it is not coherent. It is fragmented and therefore there is confusion, and that is not helpful for the sustainable finance landscape.
By developing EU sustainability reporting standards, we can create consensus about the information that investors, the wider public, NGOs and indeed companies can reasonably expect.
This clarity will help keep costs under control – companies will have common standards for reporting, rather than ever more information according to different standards. So we want to see clarity in relation to standards.
Equally, these EU standards can also contribute to digitalisation, leading to further cost-savings and gains in productivity. And they will enable sustainability information to be part of the European Single Access Point that we will propose later this year. It is a flagship initiative of the Capital Markets Union for investors to have easy access to company information in digital form.
EU reporting standards will allow us move forward on audit and assurance. Investors and other stakeholders must be able to trust the sustainability information reported by companies. And to ensure that trust, we are proposing an EU wide assurance obligation on sustainability reporting for the first time.
And the need for clarity applies as much to smaller companies as it does to larger companies.
But our proposal is proportionate: there are fewer demands on smaller companies than on larger one. We are focused on companies that investors and others most need information from.
That means reporting obligations on large companies and on listed companies, including listed SMEs. But for listed SMEs we envisage a lighter regime: phasing in reporting requirements and simpler standards.
We believe this strikes a balance between allowing smaller businesses to access capital markets and ensuring that listed SMEs can be included in sustainable investment portfolios.
The SME standards will also be available to use on a voluntary basis by non-listed SMEs – which is the vast majority of smaller businesses.
So we’re giving all companies the opportunity to contribute to the transition to a sustainable economy, and to benefit from the new investment opportunities offered by sustainable finance.
Small companies need clarity too. They might be asked for sustainability information by banks, by larger companies that they supply or indeed by customers. These requests are more and more likely to increase over time as a normal part of doing business.
So we want to provide SMEs with practical tools to meet the growing demand for sustainability information.
That is the aim behind the SME standards.
So we very much look forward to cooperating with small businesses and the organisations that represent them to ensure the success of these standards. We would encourage SMEs and their representatives to actively contribute to the standardisation work of the European Financial Reporting Advisory Group.
We also stand ready to provide tailor-made technical support to Member States to enable sustainability reporting by SMEs.
Now to the second leg: the coherence part of our strategy.
We need reporting standards that are coherent with the EU’s green goals, as well as with global initiatives.
So within the EU, coherence means remaining true to our political ambition, and that is set out in the European Green Deal and recently confirmed in the European Climate Law.
Our standards have to be coherent with climate neutrality by 2050 and a cut in greenhouse gas emissions by at least 55 percent by 2030 – less than 9 years away.
It also means being coherent with the broader EU sustainable finance framework. Financial market participants will in turn use the information reported by companies to allow them meet their own obligations under the Sustainable Finance Disclosure Regulation.
It means taking account of the different criteria defined in the Taxonomy when deciding what indicators the EU standards should contain. Companies rightly expect consistency between EU corporate reporting standards and how they report their alignment with the EU’s Taxonomy.
Coherence means matching what companies need to report about human rights and environmental due diligence under the sustainable corporate governance proposal, which is being prepared by my colleague Commissioner Reynders.
We must also respect the double materiality principle already set out in EU law – so taking account of a company’s exposure to risks and about its own impacts on people and the environment.
In short, the Corporate Sustainability Reporting Directive and the accompanying standards will help build a coherent flow of sustainability information from companies to the financial markets and wider society.
Coherence within the EU is important.
But of course markets are global. And we are therefore mindful that we need global alignment of reporting standards. Many companies that will use EU standards are global.
We support international efforts to work towards these global standards.
To be clear, we see global standards as a floor, but not a roof. They should ensure global consistency and promote fair competition across the world. But global standards should not limit EU ambition, or indeed the ambition of other jurisdictions in this area of sustainable finance.
And it is not a choice between EU standards and global standards because we need both in this transition.
We have made sure that our proposal enables EU and global alignment. For example, it integrates the core concepts in the recommendations of the Task Force on Climate-related Financial Disclosures set up by the FSB.
Coherence between European and global standards needs everyone involved to work together. And I am very glad that representatives from leading global organisations in this area are taking part in our conference today.
And I hope that our position in the European Union is clearly understood: we welcome and encourage and are involved in cooperation on global convergence. At the same time, the standards we use in Europe must meet the needs of European legislation.
Finally, a few words about the next steps.
We need to move fast. We would suggest that companies would report based on EU standards for the first time in 2024. Of course, for that to happen, we need the European Parliament and the Council to reach agreement by early next year.
In parallel, we will ask the European Financial Reporting Advisory Group (EFRAG) to start working on draft standards.
EFRAG can build on the excellent work carried out by the task force chaired by Patrick de Cambourg. I want to give my sincere thanks to the members of the Task Force who worked tirelessly on a very compelling vision of EU reporting standards around sustainability.
EFRAG will also need to reform its governance structures, in line with the balanced recommendations published by its President, Jean-Paul Gauzès.
Of course, there are challenges ahead, and I do not at all underestimate the challenges we all face. Within just a few years, every single sector of our society and our economy will have to be transformed in order for us to achieve our climate and environmental goals and to ensure a fair and inclusive recovery.
Europe is leading the way – but we know we cannot do it alone, which is why we continue to work with global partners.
I would like to finish by saying how we view this sustainability reporting drive. I would ask companies, small and large, to see it not as an imposition, but rather as a way of bringing together information that will help them be more sustainable for the future. It is a management tool for companies, as much as it is an information and transparency tool for the financial markets.
So I very much look forward to the conversation and discussion in the rest of this afternoon. I am very encouraged by what I have heard so far. I look forward to some lively debate in the rest of our proceedings.