EU weighs new requirements for businesses against biodiversity and pandemic risks
BRUSSELS (Reuters) – The European Commission plans to impose new reporting obligations on businesses to protect them from growing risks of biodiversity loss and pandemics, a draft document shows, as the EU grapples with the COVID-19 epidemic.
The document aims to attract commentary from experts and the general public on possible next legislative measures to strengthen financial sustainability.
Among the issues Commission officials are seeking advice on is the link between executive bonuses and carbon reduction results and green capital requirements.
The draft public consultation seen by Reuters asks whether biological risks should be considered more holistically when companies disclose investment strategies, given the growing negative impact of such exposures on profitability and the outlook for the future. long term.
The document, which is expected to be released in the coming days and could lead to legislative proposals at a later stage, says the COVID-19 outbreak more clearly shows the risks associated with human activity and biodiversity loss.
Experts he cites suggest that degraded habitats, associated with global warming, may lead to higher risks of disease transmission, as pathogens spread more easily to livestock and humans.
“It is important – now more than ever – to face the multiple and often interdependent threats which weigh on the ecosystems and the fauna in order to guard against the risk of future pandemics”, indicates the document.
Among the options being considered are stricter reporting requirements for listed companies, banks and insurance companies on their exposure to biodiversity loss and pandemic risks.
He asks whether investors and lenders should be required to disclose which temperature scenario their portfolios are funding, especially if they involve a rise of 2 degrees Celsius or more.
The Commission also raises the question of whether a part of managers’ bonuses should be linked to their climate achievements.
Some companies could be required to include carbon emission reductions among the factors that would affect the variable compensation of directors, the document said.
Banks could face new capital requirements or incentives related to their exposure to climate risks, the document said.
There could be a so-called “brown penalizing factor” that lenders exposed to investments in coal or other fossil fuels should set aside more capital to cover the higher risks posed by polluting assets.
But banks could also benefit from a “green support factor”, allowing them to reduce their capital requirements if they invest in green infrastructure such as renewable energy facilities.
Report by Francesco Guarascio @fraguarascio; Editing by Catherine Evans and Gareth Jones