Large banks headquartered outside the EU may opt to bring forward compliance with the bloc’s Corporate Sustainability Reporting Directive requirements ahead of the 2029 deadline, with reporting by their European-based peers set to kick off next year.
While non-EU domiciled companies and banks have until 2029 to produce CSRD reports on their Eurozone operations, disclosure from their European peers — set to commence next year — may well bring pressure from investors for similar outputs, according to Will Jackson-Moore, global sustainability leader at PwC UK.
“The world’s largest organisations, like some of the US banks, are going to get caught by CSRD because of their European operations and they’re going to have to report on a global basis by 2029,” he said at the Financial Times’ Moral Money Summit in London on Thursday.
“That’s why some of the large global organisations [are asking] ‘if we have to do this by 2029, do we just bite the bullet and do it now because it’s coming anyway?’”
The EU’s CSRD came into force in January 2023 to strengthen the rules about the social and environmental information that companies must report.
EU companies that were subject to the Non-Financial Reporting Directive — which the CSRD builds upon and has now replaced — and that have more than 500 employees must collect information this year to report in 2025. Around 50,000 more companies not impacted by the NFRD are also expected to fall within the CSRD’s remit.
Smaller companies, for example those with more than 250 employees or €50mn in turnover, will need to start reporting in 2026, while some small and medium-sized enterprises will begin reporting from the following year.
By 2029, companies such as banks with a footprint in the EU must disclose their operations with regard to the CSRD. This fourth phase of reporting spans non-EU-based companies with at least one subsidiary or branch in the EU, and a net turnover in the EU exceeding €150mn.
As an example, most US banks will have sufficiently large EU operations to require reporting against the CSRD, Jackson-Moore told The Banker.
“This is an enormous change — not like new accounting standards, [but] like an entire new system that’s coming in, and it’s not all in dollars and pounds and euros. It’s cubic metres and it’s plastic waste […] it’s an incredibly broad area,” he said.
Banks that are not immediately subject to the CSRD may face pressure from investors to disclose similar sustainability information before the 2029 deadline, as peers begin reporting anyway.
“There’s potential for [banks] to start getting asked CSRD-style questions,” said Jackson-Moore.
“The other conversation we’ve been having with large companies […] that aren’t necessarily caught by CSRD is ‘what will the analysts’ and the underlying asset owners’ [view be]?’”
Early feedback from banks suggest they are struggling to compile adequate datasets for their CSRD reports, with translating data from a banking perspective especially challenging given data security requirements.
“It’s not the output of a machine, this is maybe somebody’s banking records. [Banks] are dealing with all the regulatory requirements [together] with the appropriate level of security, so it’s more time consuming,” said Jackson-Moore.
With the introduction of CSRD reporting expected to generate a wealth of publicly available data, more scrutiny of banks is likely, he predicted.
“There’s going to be an incredibly rich data set […] out there in the public domain. With the advent of AI, the ability to download all 50,000 CSRD reports and compare and contrast [them] is going to create a huge new data set to analyse and discuss,” he said, referring not only to firms’ internal financial analysts but scrutiny from financial journalists too. “It’s going to be a different world,” he said.
