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EC launches consultation on renewed sustainable finance strategy

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09 Apr 2020

In the context of the European Green Deal and building on the 2018 Action Plan on financing sustainable growth, the European Commission (EC) has launched a consultation on its renewed sustainable finance strategy. Despite contrary findings of a recent study commissioned by the EC, the wording and the options for answering one of the questions of the consultation document seem to suggest that IFRSs may hamper sustainable finance.

In 2019, the European Securities and Markets Authority (ESMA) was commissioned by the EC to carry out research on potential short-term pressures in securities markets. The results, published in December 2019, included the finding that ESMA's investigation did not identify any need for amending existing accounting requirements. Rather, ESMA suggested three other areas where decisive action would support long-term investment behaviour:

  • amending the Non-Financial Reporting Directive to establish principles for high quality non-financial information along with a limited set of specific disclosure requirements;
  • promoting a single set of international ESG disclosure standards; and
  • requiring the inclusion of non-financial statements in annual financial reports.

Notwithstanding these findings, the new EC consultation document contains the following question:

Question 16: Do you see any further areas in existing financial accounting rules (based on the IFRS framework) which may hamper the adequate and timely recognition and consistent measurement of climate and environmental risks?

The question can be answered with yes/no/don't know. However, only when answering "yes", a new question 16.1 pops up that allows the respondent to elaborate. Four areas where the accounting rules may prove contrary to sustainable finance are then suggested (impairment and depreciation rules, provision rules, contingent liabilities, and other) and it is possible to provide details.

Please click to access the consultation on the EC website. Comments are requested by 15 July.

 

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