EU and GFANZ are both creating free 'data lakes'
The two influential bodies are developing libraries to organise the slew of corporate and investor disclosures. Here's what we know so far...
European rulemakers have just voted on plans to create a platform to collect all the sustainability information being pumped out as a result of recent and upcoming EU laws.
The European Single Access Point, sometimes compared to the Securities and Exchange Commission’s Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) in the US, is one of two current attempts to build ‘libraries’ to house and organise the reams of ESG data that entities will have to disclose because of new legislation and changing shareholder expectations.
Both projects could be game changers when it comes to reducing the cost and legwork involved in buying, collecting and preparing the data needed to analyse entities’ sustainability performance. They’re both still being negotiated, but here’s what we know so far.
European Single Access Point
First proposed by the European Commission in 2021, the European Single Access Point is expected to be run by ESMA. It will collect all kinds of data, but sustainability-related information will be a priority when establishing the platform. In addition to data that firms are obligated to provide under legislation, they will eventually be able to upload other ESG information on a voluntary basis (mainly to please investors). There will be no additional reporting requirements introduced as part of the ESAP - it will simply tweak a bunch of existing rules to include a requirement to send the information for inclusion on the platform.
The Commission and Council have already decided where they stand on the proposals. Last week a group of MEPs voted on the plans, but broader Parliament will need to decide (which it will do at plenary in coming weeks) before the three bodies can start formal negotiations.
Based on last week’s vote, Parliament will push for more laws to be covered by the ESAP: the Commission has suggested it should pull in information generated from 37 existing laws - including the green taxonomy and Sustainable Finance Disclosures Regulation. But Parliament currently wants to add the Green Bond Standard and Corporate Sustainability Due Diligence Directive when they come into force, along with three non-ESG-related laws (the CSRD is not listed, but that’s because it’s understood to be covered by the inclusion of the Accounting Directive). Council wants fewer than 37 laws covered because of the logistical/practical implications.
The information will be freely available for the most part, although there is talk of asking users to cover the cost of frequent or exceptionally large uploads or downloads. Parliament is suggesting that any company meeting its regulatory obligations should be exempt from any fees, regardless of how much information is involved.
In terms of timeframe, when the Commission made its proposals in 2021, it wanted to kick things off next year and have the first version of the platform completed by 2026. Given delays over the past 18 months, Parliament is suggesting something in between this and what the Council wants, which is to push the process back so it’s completed in 2030.
The ‘Net Zero Data Public Utility’
The second ‘library’ is known as the Net Zero Data Public Utility (NZDPU) and is being developed by the Glasgow Financial Alliance for Net Zero (GFANZ) and others. It’s backed by a long list of big hitters: launched in June 2022 by French President Emmanuel Macron and billionaire and UN Special Envoy for Climate Ambition & Solutions, Michael Bloomberg, its committee is chaired by Mary Schapiro, former Commissioner of the SEC. Other members include representatives from the European Commission, the European Financial Reporting Advisory Group, the UN, OECD, Financial Stability Board, IOSCO, International Sustainability Standards Board, Network for Greening the Financial System and International Energy Agency.
There is also a strong contingent of data providers like Bloomberg, London Stock Exchange Group, Moody’s, Morningstar, MSCI and S&P Global participating in the project. Groups dedicated to corporates, civil society, financial institutions and auditors have been set up to advise the committee.
GFANZ published a white paper last year, outlining its vision for the utility. It wants NZDPU to be a freely-available online platform where companies upload data and supporting information to be accessed by other businesses, financial institutions and the third sector.
Unlike ESAP, the utility will be “operated for the sole purpose of providing the data and transparency needed to facilitate the transition to net zero” - it won’t collect any other sustainability or financial information. It will become “a central repository for emissions reduction targets that will allow for users to filter and compare organizations’ targets based on sector, scope, and ambition”.
The plan is for the NZDPU to be integrated into the next iteration of the UNFCCC’s Global Climate Action Portal, which assesses the private sector’s progress towards meeting the goals of the Paris Agreement.
Information uploaded to the platform should include decarbonisation targets (if expressed using emissions intensity, then firms should consider also calculating it in absolute terms) and performance against those targets. Scope 1, 2 and 3 emissions data, details of reliance on estimates and carbon offsets (both voluntary and compliance), and information about standards and assurance levels should also be included over time. All greenhouse gas emissions should be addressed, in line with the expectations of the GHG Protocol.
When a company updates its information, the older details will remain on the platform to enable users to track historic performance and progress.
Going forward, it’s possible the platform might also capture data for targets such as phasing out polluting assets, capital expenditure plans and exposure to green and/or polluting activities. Data covering nature and climate adaptation/resilience may also be folded in over time.
The Committee is set to close a request for proposals for a developer for the project next week, and will make its selection by the end of March. A first version of the Utility is expected to be ready by the end of the year.