Questions & Answers
ID 1033: In the context of ESRS E1 paragraph 34 (a) and in a situation where a credit institution has set GHG emissions intensity targets, are credit institutions expected to provide associated absolute values in relation to their emissions intensity targets even if such metric is not used to steer the portfolio and due to the fact that it can be neither predictive or of confirmatory value due to the business model of the credit institutions?
ID 1076: Would it be possible for a financial institution to disclose GHG emissions targets set on Scope 3 category 15 (i.e. ‘financed emissions’) without reporting the corresponding targets in absolute emissions?’
ID 1122: Regarding absolute values for financial institutions – why not show exposure and exposure percentages instead of GHG emissions?’
- GHG removal
- GHG emission reduction
- value chain phase-in
- credit institutions
Background
Questions ID 1033, 1076 and 1112 as listed above were merged and answered simultaneously in this Explanation.
ESRS E1 paragraph 34 (a) states: ‘If the undertaking has set GHG emission reduction targets, ESRS 2 MDR-T and the following requirements shall apply:
(a) GHG emission reduction targets shall be disclosed in absolute value (either in tonnes of CO2eq or as a percentage of the emissions of a base year) and, where relevant, in intensity value …’.
ESRS E1 paragraph AR 23 states: ‘Under paragraph 34 (a), the undertaking may disclose GHG emission reduction targets in intensity value. Intensity targets are formulated as ratios of GHG emissions relative to a unit of physical activity or economic output. Relevant units of activity or output are referred to in ESRS sector-specific standards. In cases where the undertaking has only set a GHG intensity reduction target, it shall nevertheless disclose the associated absolute values for the target year and interim target year(s). This may result in a situation where an undertaking is required to disclose an increase of absolute GHG emissions for the target year and interim target year(s), for example because it anticipates organic growth of its business.’ ESRS 1 paragraph 132 states: ‘For the first 3 years of the undertaking’s sustainability reporting under the ESRS, in the event that not all the necessary information regarding its upstream and downstream value chain is available, the undertaking shall explain the efforts made to obtain the necessary information about its upstream and downstream value chain, the reasons why not all of the necessary information could be obtained, and its plans to obtain the necessary information in the future.’
ESRS 1 paragraph 133 of Chapter 10.2 Transitional provision related to Chapter 5 Value chain states: ‘For the first 3 years of its sustainability reporting under the ESRS, in order to take account of the difficulties that undertakings may encounter in gathering information from actors throughout their value chain and in order to limit the burden for SMEs in the value chain:
(a) when disclosing information on policies, actions and targets in accordance with ESRS 2 and other ESRS, the undertaking may limit upstream and downstream value chain information to information available in-house, such as data already available to the undertaking and publicly available information; and
(b) when disclosing metrics the undertaking is not required to include upstream and downstream value chain information except for datapoints derived from other EU legislation as listed in ESRS 2 Appendix B.’
Answer
Scope 3, category 15 (Investments) targets for the lending portfolio are considered value chain information (see also IG 2 Value Chain, FAQ 2). When reporting on GHG emission reduction targets, an undertaking may refer to ESRS 1 paragraph 133 (a) of Chapter 10.2 Transitional provision related to Chapter 5 Value chain, which allows an undertaking to adopt transitional measures for value chain information in the first three annual sustainability statements.
This provision is applicable when the undertaking has adopted intensity targets for its Scope 3, category 15 (Investments) emissions, but the corresponding associated absolute values for the target year and interim target years (ESRS E1-1 paragraph AR 23) are not available (see ESRS 1 paragraph 132).
When only targets in intensity value are available, in the first three years of reporting, a financial institution may limit the information on value chain targets to the information available in-house, which might include data already collected for Pillar 3 reporting.
EFRAG may work on specific sector provisions in the future to cover this issue.
Relations
Paragraph | Content |
|---|---|
For the first 3 years of the undertaking’s sustainability reporting under the ESRS, in the event that not all the necessary information regarding its upstream and downstream value chain is available, the undertaking shall explain the efforts made to obtain the necessary information about its upstream and downstream value chain, the reasons why not all of the necessary information could be obtained, and its plans to obtain the necessary information in the future. | |
For the first 3 years of its sustainability reporting under the ESRS, in order to take account of the difficulties that undertakings may encounter in gathering information from actors throughout their value chain and in order to limit the burden for SMEs in the value chain: | |
Under paragraph 34 (a), the undertaking may disclose GHG emission reduction targets in intensity value. Intensity targets are formulated as ratios of GHG emissions relative to a unit of physical activity or economic output. Relevant units of activity or output are referred to in ESRS sector-specific standards. In cases where the undertaking has only set a GHG intensity reduction target, it shall nevertheless disclose the associated absolute values for the target year and interim target year(s). This may result in a situation where an undertaking is required to disclose an increase of absolute GHG emissions for the target year and interim target year(s), for example because it anticipates organic growth of its business. | |
If the undertaking has set GHG emission reduction targets , ESRS 2 MDR-T and the following requirements shall apply: | |
Under paragraph 34 (a), the undertaking may disclose GHG emission reduction targets in intensity value. Intensity targets are formulated as ratios of GHG emissions relative to a unit of physical activity or economic output. Relevant units of activity or output are referred to in ESRS sector-specific standards. In cases where the undertaking has only set a GHG intensity reduction target, it shall nevertheless disclose the associated absolute values for the target year and interim target year(s). This may result in a situation where an undertaking is required to disclose an increase of absolute GHG emissions for the target year and interim target year(s), for example because it anticipates organic growth of its business. | |
If the undertaking has set GHG emission reduction targets , ESRS 2 MDR-T and the following requirements shall apply: | |
For the first 3 years of its sustainability reporting under the ESRS, in order to take account of the difficulties that undertakings may encounter in gathering information from actors throughout their value chain and in order to limit the burden for SMEs in the value chain: | |
For the first 3 years of the undertaking’s sustainability reporting under the ESRS, in the event that not all the necessary information regarding its upstream and downstream value chain is available, the undertaking shall explain the efforts made to obtain the necessary information about its upstream and downstream value chain, the reasons why not all of the necessary information could be obtained, and its plans to obtain the necessary information in the future. | |
For the first 3 years of its sustainability reporting under the ESRS, in order to take account of the difficulties that undertakings may encounter in gathering information from actors throughout their value chain and in order to limit the burden for SMEs in the value chain: | |
For the first 3 years of the undertaking’s sustainability reporting under the ESRS, in the event that not all the necessary information regarding its upstream and downstream value chain is available, the undertaking shall explain the efforts made to obtain the necessary information about its upstream and downstream value chain, the reasons why not all of the necessary information could be obtained, and its plans to obtain the necessary information in the future. |