The role of EMAS in sustainable finance

EMAS is used as a strategic tool to drive the sustainability agenda in the financial sector in Austria

The Austrian government has launched a new program, the Green Finance Alliance, that aims to make a positive contribution to the sustainable development of the Austrian financial sector. Kick-off of the Green Finance Alliance will be in May 2022. Under this program, Austrian financial institutions such as banks voluntarily commit to aligning their portfolios with the 1.5-degree target in accordance with the Paris Agreement. This requires setting ambitious targets and introducing measures that will enable financial institutions to address CO2 emission in their portfolio and achieve climate neutrality. The requirement level is matched to the EU climate targets for 2030 and the EU target of climate neutrality by 2050.

One key component of this initiative is EMAS. As part of fulfilling their climate strategy obligations, Austrian financial institutions participating in the alliance are required to establish an operational environmental management system through EMAS in order to proactively manage climate-relevant aspects (e.g. transport, scope-emissions, resource consumption, energy use) in their operations. The companies will be required to have their environmental processes and measures audited by 2025 at the latest. To show the performance in the climate management area, companies can implement a travel policy for climate-friendly travel, define climate-effective procurement criteria and supply their company sites with green electricity.

The interest of financial institutions in EMAS registration is growing

At the European level, there are already prominent examples of banks and financial institutions that are EMAS-registered. These include Unicredit (Italy) and Eurobank (Greece). At the Austrian level, Österreichische Nationalbank (ONB), OeKB (Austrian Export Credit Agency), VBV, BKS Bank and Kommunalkredit Austria AG are already participating in the scheme. The regional bank, Oberbank AG, is implementing EMAS at the moment. In Austria, there is a steadily growing interest among national financial institutions in an EMAS registration and a growing recognition in the effectiveness of EMAS as a tool to improve environmental performance and meet European and national environmental targets. Demand is expected to increase with the new Green Finance Alliance.

Benefits of EMAS for banks and insurance companies

  • No double loads
  • EMAS is the only environmental management scheme with a clear legal basis in European law, namely Regulation (EC) No 1221/2009. In principle, the aim is to align other European laws and initiatives with EMAS where possible. This has been observed on a national level in Austria. For example, it was decided that with the introduction of an operational environmental management system according to EMAS, the obligation of the companies to prepare a waste management concept is eliminated.

  • Multisite procedures are permitted under EMAS and already put to practice
  • It is common for financial institutions such as banks to operate multiple sites. For EMAS registrations in this sector, the sampling procedure is permissible, which allows the auditing of selected sites from a representative sample with comparable sites. This creates a right balance between verification effort and confidence in the system. Some banks like Unicredit already use the sampling procedure.

  • The trend is on towards promoting sustainable management in the financial markets
  • In view of the new initiatives at EU level, Sustainable Finance Disclosure Regulation (SFDR), Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy, a trend towards promoting sustainable management and reporting in the financial markets is clearly discernible. Recognizing that the financial sector is critical in driving economic growth from traditional economies based on carbon-intensive industries to sustainable industries with clean energy and low carbon emissions, new initiatives have emerged at the EU level that explicitly target the role of financial markets.

    In particular, greater priority has been given to reporting on non-financial, sustainability-related information. Since the entry of force of EU Directive 2014/95/EU in 2017, there has been a CSR reporting obligation in the EU to disclose non-financial information, including environmental, social and employee-related information. All capital market-oriented companies as well as credit institutions and insurance companies fall under this CSR reporting obligation. EMAS has been recognized as a framework for reporting on environmental issues. The link between EMAS and CSR reporting was reaffirmed in an implementation guide from the European Commission for non-financial reporting in 2017, which recognized EMAS for assessing the materiality of internal and external factors. As such, companies subject to the CSR can base their reporting on EMAS. The question of whether and to what extent the EMAS environmental statement may be used as a basis in connection with the reporting obligations under a new CSR Directive (CSRD) is currently still the subject of political negotiations. Notwithstanding, there is a potential for EMAS environmental statements to be used as the basis for non-financial reporting in the future, as the reported information in EMAS environmental statements is in conformity with the law, audited by an independent verification body and extensive in the scope of environmental information to be disclosed.

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