Introduction

Plans to ease EU sustainability reporting requirements raise concern with lawyers and European Central Bank

The European Commission's proposal to ease EU sustainability reporting requirements to lift the compliance burden on European companies and boost their international competitiveness continues to provoke unease, including among EU institutions, even though the initiative has received broad support among member states and the European Parliament. The European Central Bank has warned that excluding up to 80% of companies operating in the EU from mandatory reporting requirements under the Corporate Sustainability Reporting Directive by raising the threshold for compliance to companies with more than 1,000 employees or net annual turnover exceeding €50m could deprive investors of vital information that is also necessary to maintain financial stability and conduct effective monetary policy. Meanwhile, a group of 31 academic law specialists from around Europe argues that removing a requirement on larger companies to act on their mandatory transition plans increases the risk they will face lawsuits for failing to meet the EU's greenhouse gas emission reduction targets.

Key Governance Developments

European Central Bank warns against Commission plan to exempt 80% of companies from sustainability reporting requirements

The European Central Bank has warned against European Commission proposals that would exclude up to 80% of companies operating in the EU from mandatory sustainability reporting requirements under the Corporate Sustainability Reporting Directive. The legislation as enacted increases the number of businesses required to report from around 12,000 under a previous directive to more than 50,000, but the Commission is looking to restrict the requirement to companies with more than 1,000 employees or net annual turnover exceeding €50m. The ECB agrees with the aim of streamlining sustainability reporting and reducing the administrative burden on business, but warns that cutting the scope of the directive could deprive investors of vital information. It says the availability of high-quality sustainability-related information is also necessary to maintain financial stability and conduct effective monetary policy.

Best source: ESG Today

Relaxation of EU sustainability reporting rules could increase companies’ risk of climate-related lawsuits: academics

The European Commission's proposals to relax corporate sustainability reporting rules could lead to more climate-related court cases, according to a group of 31 academic law specialists from various European countries. The Commission is looking to ease the administrative burden on businesses of reporting and to protect their international competitiveness. However, the academics argue that removing the requirement that larger companies take steps to implement their mandatory transition plans means that mere paperwork, rather than good faith action, would suffice to meet the obligation, increasing the risk they will be sued for failing to meet the EU's greenhouse gas emission reduction targets.

Best source: Reuters (subscription required)

Asset managers’ progress falters on compliance with responsible investment standards: ShareAction

A study of 76 of the world's largest asset managers has found that their progress on 20 governance, stewardship, climate change, biodiversity and social impact standards has stalled. Non-profit ShareAction says just 10 of the asset management groups met more than half of the standards. Dutch asset manager Robeco demonstrated the greatest conformity, followed by the same country's pension fund manager APG Asset Management and France's Axa Investment Managers. Managers scored most poorly on biodiversity metrics, with 40% having published no assessment of their impact.

Best source: Sustainable Views

Luxembourg government unveils draft law transposing EU directive mandating gender representation on company boards

The government has drawn up legislation to transpose into national law the EU's 2022 Gender Balance on Corporate Boards Directive, which requires large listed companies to ensure at least 40% of non-executive directors or 33% of all board members are women. In January, the EU launched infringement proceedings against Luxembourg and 16 other member states for missing the deadline of 28 December last year to adopt the directive. Listed companies with annual sales exceeding €50m or with more than 250 employees will be expected to comply with the legislation from June next year, affecting 35 businesses in Luxembourg, according to finance minister Gilles Roth.

Best source: Luxembourg Times

Female representation declines on supervisory boards of Germany’s largest listed companies

For the first time in 15 years, the proportion of women on the supervisory boards of the 40 companies that make up the Frankfurt Stock Exchange's DAX equity index has decreased, from a record high of 40% to 38.2%. Recent shareholder meetings saw more women (14) than men (12) leaving the boards of Germany's biggest companies, while 18 men were appointed as directors compared with 10 women. According to leadership advisory firm Russell Reynolds, the trend represents a setback for gender diversity in corporate leadership.

Best source: Handelsblatt (in German, subscription required)

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