EFRAG's Sustainability Reporting Board (SRB) has agreed to include specific mandatory disclosure requirements in its standards to help banks comply with the EU banking regulation.
Under pillar 3 of the Capital Requirements Regulation (CRR), banks are required to report on the ESG risks faced by the business activities they invest in.
The European Banking Authority (EBA) asked the SRB at its meeting on 5 October if it would consider mandating certain disclosures in the ESRS so that reporting companies provide the information that banks need to complete their CRR disclosure requirements.
Pilar Gutiérrez Rodríguez, head of Reporting and Transparency Unit at the EBA, argued: "The main source of this (Pillar 3) information is public disclosures by corporates under the NFDR so this is why it's very important that this information is still mandatory" in the ESRS.
She specified the areas where disclosures in the ESRS cross-cutting standards should be mandatory for reporting entities.
In terms of transition risks, she said it should be mandatory for corporates to "disclose their greenhouse gas emissions both absolute, but also in terms of intensity", which would require them to disclose the volume of their emissions per unit of GDP.
She also said that companies should be required to provide information on the geographical location of "investments that are subject to physical risk".
Tom Dodd, head of sustainability reporting at the European Commission, attended the meeting and said the from the Commission's perspective, EPA's request "seems both legitimate and important".
"The CRR under which pillar three exists see is listed as one of those items that the Commission must take account of when adopting the standards." He added.
With support from the board and Dodd for EBA's request, the Technical Expert Group will work out the practicalities of ensuring all the standard that banks need for Pillar 3 are mandatory for entities.