18 September 2020
The EU has been looking to increase good practice and reporting on Environmental, Social Impact and Governance (ESG) for some time. With a specific focus on the financial services sector, the European Banking Authority (EBA) has published an online survey asking for input from credit institutions on their practices and views on the disclosure of environmental social governance (ESG) risks. The survey is addressed large credit institutions that will be required to make Pillar 3 disclosures on ESG risks under the Capital Requirements Regulation (CRR).
The survey consists of three main parts: general questions on the current status of ESG disclosures, the interaction between Pillar 3 disclosures and policy initiatives and the implementation of the upcoming disclosure requirements of Article 449a of the CRR.
The survey can accessed either via the webpage or responses can be submitted via this online tool. Questions can be submitted to ESG.firstname.lastname@example.org.
The deadline for submission is 18:00 CEST on 16 October 2020.
Pillar 3 disclosures are seen as critical in the promotion of transparency and disclosure of the prudential risks across the market. Pillar 3 disclosures are made in a harmonised and universally accepted format. This provides for the information on the risk profiles of institutions to be comparable and comprehensive. This is key as Pillar 3 disclosures are made in relation to multiple areas which go beyond ESG risks and includes amongst others, those disclosures related to remuneration policies.
The views collected from the survey will be used to assist in the development of the Pillar 3 framework. Specifically, to aid the EBA’s work in developing draft implementing technical standards on Pillar 3 disclosure of prudential information on ESG risks by institutions and to monitor the short-term expectations mentioned in the EBA Action Plan on Sustainable Finance.
In addition to the disclosure of ESG risks forming part of the Pillar 3 and sustainable finance framework, investors and other stakeholders are all increasingly concerned with how companies approach and integrate ESG considerations into their strategies. The results of this concern and the importance attached to ESG are evident in the number of companies that have taken action to incorporate ESG targets into their executives’ compensation structures. This is particularly true for financial services firms, who we identified in our recent FTSE100 review as being a leading sector when incorporating ESG targets into their executive compensation structures.
We will be discussing the inclusion of ESG targets and risks into executive compensation structures at our FTSE100 virtual roundtables.
I will also be hosting a GEO session on 22nd September at 16.20 (GMT) “A little less conversation...a bit more action”, with Louise Sutton from Unilever and Anna Fletcher from Rentokil, where we will be talking about the key developments in the use of ESG targets in reward.
If you have any questions about this alert, or if you would like to discuss your remuneration structures generally, please do let us know.
Janet Cooper OBE