Non-financial reporting under the EU taxonomy – Theme inspection by the Danish FSA
Published 6 November 2024
Category: Impact and ESG
The Danish FSA has completed a theme inspection regarding financial market participants and companies reporting under the EU taxonomy. The inspection focuses on the reporting of the financial year 2023, which is the first time the companies are obligated to report on how their economic activities are environmentally sustainable.
The purpose of the inspection is among others to clarify whether the financial companies have published the required and mandatory information in the non-financial statement in accordance with article 8 of the EU taxonomy in a complete, understandable and clear way. The companies are among others required to report on KPIs for environmentally sustainable economic activities included in their assets.
According to article 8 of the EU taxonomy, any undertaking that is subject to an obligation to publish non-financial information pursuant to article 19a or article 29a of Directive 2013/34/EU on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings (“the Accounting Directive”) shall include in its non-financial statement or consolidated non-financial statement information on how and to what extent the undertaking’s activities are associated with economic activities that qualify as environmentally sustainable under article 3 and 9 of the EU taxonomy. With the Corporate Sustainability Reporting Directive (“CSRD”), the scope of sustainability reporting will expand gradually. Read more about CSRD in our previous update.
The inspection shows that all the 20 financial companies included in the inspection have published a report regarding sustainability matters, however, the companies did only to some extent publish all the information required. In particular, the FSA noticed shortcomings in relation to the companies’ use of the required schedules for the reporting, lack of quality assurance of the report and an insufficient description of the additional information provided to help the users of the report to understand the reported numbers.
The results of the inspection show that the financial companies do report on sustainability matters, however, many of the companies still have some work to do before the reporting is complete. The Danish FSA therefore expects that the companies will take this inspection into account in their upcoming reporting to ensure that the reporting becomes clear and adequate.
The Danish FSA has outlined the following three focus areas for companies in future:
(i) Companies shall include and fill out mandatory schedules in their reporting in accordance with the form requirements.
(ii) Qualitative information shall be included and described in full.
(iii) Voluntary information may be used but not confused with mandatory information to give a better understanding of the reporting.
Due to limitations in the companies’ method of accounting and data, the theme inspection does not paint a complete picture of the companies’ environmentally sustainable activities. Especially, the following three limitations have been highlighted:
(i) Exposures to smaller companies, i.e. companies not covered by the requirements to prepare sustainability report according to the Corporate Sustainability Reporting Directive (CSRD), cannot be included,
(ii) The companies’ access to data.
(ii) The fact that several activities are not covered by the EU taxonomy.
The Danish FSA expect this will become more accurate in the next years as the data will be more comprehensive. Further, it will be possible to use voluntary reporting to elaborate on among others the exposures to smaller companies.
In continuation to the inspection, the Danish FSA has published a memorandum containing a general introduction to the reporting requirements and a review of the companies’ exposure to environmentally sustainable economic activities. Further the Danish FSA has published a good practice report containing a technical review of the reporting requirements and the Danish FSA’s expectations of the companies’ upcoming reporting.
Read the memorandum in Danish here and the report on good practice in Danish here.
Also tagged ‘Disclosure Requirements’
Thematic review of pension funds subject to SFDR article 8
The Danish Financial Supervisory Authority initiated an inspection of three pension funds’ disclosing pursuant to SFDR article 8 in November 2023.
ComplianceDisclosure RequirementsSustainabilitySummary report of the consultations on the implementation of SFDR
The European Commission initiated in September 2023 public and targeted consultations on the implementation of the SFDR running until 22 December 2023. A summary of the contributions on the consultations have now been published in a summary report.
Disclosure RequirementsRegulatory Technical StandardsSustainabilityThe Danish FSA: Investment Managers must be better at disclosing sustainability related information
The Danish Financial Supervisory Authority has in a thematic review assessed several sustainability related issues at two investment managers.
Disclosure RequirementsSustainabilityFinal Report with amendments for RTS
The European Supervisory Authorities (EBA, EIOPA and ESMA) (together ESAs), published a Final Report with proposed amendments to the Commission Delegated Regulation (EU) 2022/1288 and the Regulatory Technical Standards (RTS) in December 2023.
Disclosure RequirementsESMARegulatory Technical StandardsSustainabilityChanges to the SFDR RTS proposed by ESA Final Report
The European Supervisory Authorities (EBA, EIOPA and ESMA) (together ESAs), published a Final Report with proposed amendments to the SFDR Delegated Regulation (Regulation (EU) 2022/1288) and the SFDR Regulatory Technical Standards (RTS) in December 2023.
Disclosure RequirementsESMARegulatory Technical StandardsSustainabilityEU Green Bond Regulation enters into force
The EU Regulation (EU) 2023/2631 of the European Parliament and of the Council of 22 November 2023 on European Green Bonds and optional disclosures for bonds marketed as environmentally sustainable and for sustainability-linked bonds (the “EU Green Bond Regulation”) has been published in the Official Journal of the EU and enters into force 20 December 2023.
Disclosure RequirementsGovernanceSustainabilityConsultations on the implementation of SFDR
On 14 September 2023, the European Commission initiated two consultations on the implementation of SFDR. The consultations focus on, among others, the regulation’s useability and role in combatting greenwashing.
Disclosure RequirementsRegulatory Technical StandardsSustainabilityMemo from the Danish Financial Supervisory Authority on periodic reporting
On 30 August 2023, the Danish Financial Supervisory Authority (“DFSA”) published a memo describing the requirements in SFDR art. 11 for periodic reporting.
ComplianceDisclosure RequirementsSustainabilityUpdated guide on the SFDR and Taxonomy Regulation
The updated guide takes regulation and guidance from public consultations and Q&A’s since July 2022 into account. Further, it reflects the most recent market practice on the application of the regulations.
ComplianceDisclosure RequirementsSustainabilityEU Commission answers questions on interpretation of SFDR
The EU Commission has published its answers to questions on the interpretation of SFDR. The questions were put forward by the ESAs in September 2022 in order to receive clarification within central aspects of SFDR.
Disclosure RequirementsSustainabilityEU Commission answers questions on interpretation of SFDR
The EU Commission has published its answers to questions on the interpretation of SFDR. The questions were put forward by the ESAs in September 2022 in order to receive clarification within central aspects of SFDR.
Disclosure RequirementsSustainabilityConsultation on the ESAs review of SFDR
The European Supervisory Authorities (EBA, EIOPA and ESMA) have earlier this month published a consultation paper in which they propose amendments to the Commission Delegated Regulation.
Disclosure RequirementsESMARegulatory Technical StandardsSustainabilityNew rules on severance pay to managers of AIFMs adopted
On 18 April 2023, the Danish Parliament has adopted the proposal to amend the Danish financial regulation, including the Danish Alternative Investment Fund Managers Act.
Danish RegulationDisclosure RequirementsManagement RemunerationThematic review of sustainability disclosures for funds with sustainable investment as the objective
On 3 February 2023, the Danish Financial Supervisory Authority (“DFSA”) published a thematic review of sustainability disclosures for eight funds with sustainable investments as their objective.
ComplianceDisclosure RequirementsSustainabilityNew rules on severance pay to members of the management of AIFMs
On 8 February 2023, the Danish Government presented a proposal for amendments in the Danish financial regulation, including the Danish Alternative Investment Fund Managers Act.
Danish RegulationDisclosure RequirementsManagement RemunerationAmendments to the SFDR RTS Adopted by the European Commission
On 31 October 2022, the European Commission adopted amendments to the Commission Delegated Regulation (EU) 2022/1288 determining regulatory technical standards (RTS) for the SFDR. The amendments aim to ensure that disclosures in future will ensure full transparency about investments in the sectors covered by the Complementary Delegated Act.
Disclosure RequirementsNew Guide on SFDR and EU Taxonomy Regulation
Invest Europe has published a comprehensive members guide on EU ESG reporting requirements for fund managers to clarify grey areas that exist around the day-to-day application of the regulation.
ComplianceDisclosure RequirementsSustainabilityAuthorised AIFMs’ Integration of Sustainability Factors and Risks Applies from 1 August 2022
Authorized AIFMs shall from 1 August 2022 ensure that their systems, processes, and internal controls reflect relevant sustainability risks as defined in the SFDR.
AIFMDComplianceDisclosure RequirementsSustainabilityESMA Provides Guidelines for Funds’ Use of ESG Related Terms
On 31 May 2022, the European Securities and Markets Authority (ESMA) published a supervisory briefing which provides guidance on sustainability risks and disclosures in investment management.
Disclosure RequirementsESMASustainabilityFinal Regulatory Technical Standards for SFDR and Taxonomy Regulation are Published
The RTS will define the new standard for sustainability-related disclosures in the financial services sector in the EU and supplements provisions of the SFDR and of the Taxonomy Regulation.
AIFMDComplianceDisclosure RequirementsSustainabilityInvest Europe to set ESG Reporting Standards
In November 2021, Invest Europe released its Climate Ambition in which the association committed to contribute to the EU becoming climate-neutral by 2050 and pledged to help the P/E and VC industry move towards net zero.
AIFMDComplianceDisclosure RequirementsSustainabilityThe Danish FSA: Significant Room for Improvement for SFDR Disclosures
The Danish FSA has assessed the quality of 4 pension companies and eight credit institutions' website disclosures with regards to information about their policies on the integration of sustainability risks in the investment decision-making process.
AIFMDComplianceDisclosure RequirementsSustainabilityApplication of SFDR Level 2 Obligations Delayed (Again)
The European Commission has once again delayed the application of the level 2 obligations of the Sustainable Finance Disclosure Regulation (SFDR) until January 2023.
AIFMDComplianceDisclosure RequirementsSustainabilityESA Publishes Joint Supervisory Statement on the Interpretation on Fund Managers’ ESG Disclosure Obligations
From 10 March 2021, fund managers are required to make certain ESG disclosures available on their website and in their pre-contractual disclosures to investors.
AIFMDComplianceDisclosure RequirementsSustainabilityESA Consults on Fund Managers’ ESG Disclosure Obligations
The European Supervisory Authorities (ESA) has published draft technical standards setting out detailed rules on i.a. fund managers’ obligations under the ESG Disclosure Regulation.
AIFMDComplianceDisclosure RequirementsSustainabilityProposal to Transpose DAC6 into Danish Law Presented in the Danish Parliament
On 6 November 2019 the Danish government presented its proposal to transpose the EU directive regarding mandatory reporting in relation to arrangements with cross-border implications (“DAC6”) into Danish law.
ComplianceDAC6Disclosure RequirementsESA issues Joint Supervisory Statement on the Application of Scope of the PRIIPs Regulation to Bonds
The statement seeks to mitigate the risk of divergent application, by national competent authorities, for determining the type of bonds for which it is necessary to draw up a Key Information Document (KID).
Disclosure RequirementsESMAKID / PRIIPSESA issues Consultation Paper on Amendments to the Existing PRIIPS Regulation
On 16 October 2019 ESA has issued a consultation paper on amendments to existing rules underpinning the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs).
Disclosure RequirementsESMAKID / PRIIPSOther updates
New ESG template for SMEs
In September 2024, the Danish Business Authority published a new ESG template targeted at SMEs.
CSRDSustainabilityGuidelines on consolidated sustainability reporting expanded
The Danish Business Authority has expanded their Guidelines on consolidated sustainability reporting with an updated version 2.
CSRDSustainabilityThe NIS2 Directive now applies to designated IT suppliers to financial companies as appointed by the Danish FSA
As of today, the NIS-2 Directive (“NIS2”) applies to the most important IT suppliers to the financial sector.
DORANIS2National versions of guidelines on funds’ names now published
On 21 August 2024, the European Securities and Markets Authority (“ESMA”) published their guidelines on funds’ names (the “Guidelines”) in versions translated into all the official EU-languages.
ESMASustainabilityRegistration of “sustainability auditors” is now possible
On 1 June 2024, the new rules on requirements to companies’ sustainability reporting (entailed by CSRD) entered into force.
CSRDSustainabilityMeasures to support corporate sustainability reporting
In July, the European Securities and Markets Authority (“ESMA”) published measures to support corporate sustainability reporting.
CSRDESMAESRSSustainability