Essential Corporate News: Week ending April 16, 2021

IBE: The Ethics of Diversity

On April 14, 2021, the Institute of Board Ethics (IBE) published a board briefing summarising the key conclusions and recommendations of a report it published on December 17, 2020, The Ethics of Diversity, on ethics and the diversity of boards.

The report is intended to provide a practical guide on why diversity matters for companies, boards and their stakeholders and it notes that while much progress has been made, especially around gender, the push for diversity has not yet delivered on its full potential.

The report makes ten key recommendations (with accompanying suggestions to help companies meet those recommendations) to embed genuine diversity of thought and life experience at board level. These are as follows:

1. Understand and explore the diversity of thought and experience on the board.
2. Ensure that the company’s push for diversity and inclusion is a strategic and commercial imperative for the organisation.
3. Look critically at the culture in the boardroom.
4. Review nomination and succession planning processes for all board and executive committee appointments.
5. Look critically at the individual roles assigned to board members.
6. Learn from the experience of improving gender balance and learn from the experience of other sectors.
7. Understand the company’s stakeholders. Actively listen and respond to them.
8. Communicate aims and milestones internally and externally.
9. Learn from a more challenging board evaluation.
10. Recognise inequalities and racism as systemic risks to the economy and see diversity and inclusion as an opportunity for long-term change.

(IBE, The Ethics of Diversity, Board briefing, 14.04.2021)

AFME: ESG Disclosure Landscape for Banks and Capital Markets in Europe

On April 14, 2021 the Association for Financial Markets in Europe (AFME) launched a report highlighting the need for financial institutions to have access to consistent non-financial reporting from corporates to be able to support the transition to a low-carbon economy.

The report provides a detailed inventory and analysis of the key elements and requirements of the European regulatory landscape for ESG disclosures, as well as the voluntary TCFD Framework (The Task Force on Climate-related Financial Disclosures), and summarises how financial institutions can navigate these requirements. It breaks down the multiple requirements of the TCFD, the Non-Financial Reporting Directive (NFRD), and Pillar 3 disclosures and the Sustainable Finance Disclosure Regulation (SFDR) into distinct disclosure categories, or “pillars” (covering governance, business strategy, risk management, and KPIs) and identifies where common information and metrics can be leveraged across these pillars and the various standards.

The report also looks at the existing and evolving frameworks for climate risk disclosures by comparing the differences, and synergies, between the TCFD and NFRD frameworks. Recognising the practical challenges for firms to capture data from within their organisations to feed into the disclosure requirements, the report maps out information flows, identifying the key divisions within firms which generate sustainability-related data points. It then illustrates how this information either ties into broader entity-level disclosures or relates to product-specific disclosures and examines the interplay with client engagement and communications.

The report also provides practical tips for how firms can approach the governance of ESG disclosures across their organisations and it provides a range of recommendations for policymakers for promoting synchronisation between reporting frameworks, and encouraging simplification of ESG reporting requirements.

(AFME, ESG Disclosure Landscape for Banks and Capital Markets in Europe, 14.04.2021)