Editorial

Dear Colleagues,
Enhanced corporate transparency has been dominating the European agenda in this first quarter of 2016.
Back in March Member States had reached a political agreement on the automatic exchange of tax-related financial information of multinational companies, Country by Country Reporting (CbCR), still subject to UK parliamentary scrutiny. The rules apply to multinational companies that operate cross-border in the EU to allow all Member States to directly address companies that try to escape their share of taxes where they make their profits. Later on, soon after the ECON Committee was discussing its draft report on tax avoidance practices, the Panama Paper leaks unveiled a new tax-related scandal that reminded all of us of the recent and ground-braking Luxemburg Leak revelations; adding further pressure on European policy makers to take their responsibilities for adequately addressing the issues at stake. On the 12th of April, as announced, and not without controversy, the European Commission presented a proposal for introducing public reporting requirements for the largest companies operating in the EU. Eurosif supported the draft directive as a valid mean to enhance shareholders’ engagement and trust allowing to better identify share prices risk, safer investment and efficient pricing of companies. Our community of investors looks at this tool as a way to gain a useful source of information to assess companies’ approaches to tax management and the associated long-term risks that this might bring.
These past months have also been rich with Commission consultations focused on corporate transparency explored as a mean to increase investment. The first consultation of the year was on ‘Long-term and sustainable investment’, specifically seeking to identify which potential obstacles to sustainable investment are most relevant and recurrent in the investment chain.
The second most relevant consultation this year was looking specifically at reporting. The consultation on non-financial reporting guidelines aimed at gathering evidence to propose or advise on a set of non-binding guidance on methodology for reporting of non-financial information by certain large companies across all sectors. It follows article 2 of Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups.
This need for transparency echoes a renewed appetite for better risk management not only for individual issuers but also on a more high-level basis. IMF’s Financial Sector Expert Ashraf Khan, a former official at the Dutch central bank, published in February a working paper calling ‘for non-financial risks to be incorporated into the way central banks are run’. By stressing the importance for central banks to incorporate non-financial risk management into their strategic planning and governance framework, the paper confirms the objectives of the Task Force on Climate Related financial disclosure. Established by the Financial Stability Board (FSB) to promote ‘more effective climate-related disclosures able to support informed investment, credit and insurance underwriting decision about reporting companies’ while enabling stakeholders at large to estimate the financial system’s exposure to climate-related risk, the Task Force is currently working on a consultation solely focused on improving disclosure and increased stakeholder outreach.
Encouraged by all these positive signals for our community of investors, we look forward to beneficial results in the next months to come. Enjoy your reading!
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