Stockholm (NordSIP) – The EU’s Taxonomy Regulation, the pioneering classification system defining sustainable economic activities and one of the cornerstones of the union’s Action Plan on Sustainable Finance has been up and running since 2020. Implementing the continuously evolving regulation is, however, still a work in progress. To ease the pain and allow companies more time to comply with disclosure requirements, the European Commission opted for a phased implementation approach. Yet, even if financial companies, for instance, were granted a two-year grace period for reporting, aligning KPIs is becoming mandatory in fiscal year 2023.
To gauge how Sweden’s financial companies are tackling the implementation of the regulatory framework, the Swedish financial supervisory authority, Finansinspektionen (FI), has recently conducted an in-depth analysis, reviewing how a sample of seven banks and six insurance companies have reported in accordance with the regulation in their annual reports for 2022. On 24 January, FI published a report, summarising their findings. According to FI, it is still difficult to compare the sustainability data that financial institutions report under the Taxonomy. FI is urging firms to follow more closely the European Commission’s guidance and make it easier for investors to compare companies and make sustainable choices.
The analysis shows that overall, the companies comply with the main reporting requirements. However, they tend to report in different ways, which makes it difficult for market participants to understand the information and compare the companies with each other. The report highlights positive examples of companies disclosing identified shortcomings, pointing out specific data sources and explaining in detail the processes in place to produce the reporting. On the other hand, some companies have opted for brief and less informative reporting.
“It is important that financial companies’ taxonomy reporting is comparable and easy to understand so that market participants can make wise and sustainable investments,” comments Tove Husell, acting head of sustainability at FI (in Swedish). “In a broad sense, this is about being able to achieve the EU’s climate goals,” she adds.
Starting from the financial year 2023 onwards, financial companies will be required to use detailed templates for reporting on how their activities are linked to environmentally sustainable economic activities for climate change mitigation and adaptation. For the rest of the objectives, simplified reporting will continue to apply. FI recommends that firms use relevant parts of the templates available for quantitative reporting of compliance with the taxonomy also for simplified reporting of the proportion of exposures to economic activities covered and not covered by the taxonomy. According to the supervisors, this would make it easier for stakeholders to compare the reporting from different firms.
FI also encourages firms to follow the guidance on interpretation of the regulatory framework published by the European Commission in the form of questions and answers to a greater extent.
“We will use the results of this in-depth analysis in our continued supervisory work and in our ongoing dialogue with firms,” writes FI. Swedish financial companies better stay tuned.
