Sven Giegold

ESAs proposal for ESG disclosure standards: Funny lobby outcomes. Need for definition of fossil sector beyond coal

The three European Supervisory Authorities (ESAs) have published their consultation on environmental, social and governance (ESG) disclosures in the context of the ESG disclosure regulation. On the basis of a draft regulatory technical standard, they seek input on proposed ESG disclosure standards for financial market participants, advisers and products. Under the regulation on sustainability-related disclosures in the financial sector, the EU financial supervisors are tasked to develop standards on the content, methodology and presentation of ESG disclosures both at entity level and product level. The proposal contains a list of ESG disclosure indicators covering adverse sustainability impacts related to greenhouse gas emissions, energy performance, social matters, human rights and more.

In their draft, the ESAs propose a definition for the fossil fuel sector, to be used as one indicator showing to what extent an investment is exposed to this sector. However, the definition contains only solid fossils which means coal and lignite. Regarding the disclosure of greenhouse gas emissions, the ESAs proposed a breakdown into scope 1, 2 and 3 emissions as defined by the Greenhouse Gas Protocol. Scope 1 covers an entity’s direct emissions, scope 2 emissions related to the electricity consumed by an entity and scope 3 all other indirect emissions of an entity not covered by scope 2 such as procurement, travel and waste.

MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:

“The EU financial supervisors’ proposed definition of the fossil fuel sector as including only coal and lignite is highly misleading and needs correction. The limitation of the fossil sector definition to coal would cause a serious underestimation of a market participant’s direct exposure to the fossil fuel sector, for instance through shares in an oil company. The ESAs’ final proposal needs to set an encompassing definition of the fossil fuel sector in order to provide transparency about financial risk related to stranded assets. The current drop in the oil price has shown fragilities in our economies which can heavily impact balance sheets and thus create major disturbances in the financial sphere. As a side note, it is curious that clean cars are explicitly exempted from the definition of the coal-only fossil fuel sector – who has ever seen a clean car fuelled with coal? EU lobbying sometimes leads to funny outcomes.

The proposed breakdown of reported greenhouse gas emissions into scope 1, 2 and 3 emissions would provide necessary transparency about an investment decision’s impact on climate. A high degree of transparency on the ESG impact of investments is key to making the financial system adequately reflect ESG risks and consequently channeling more funds into sustainable economic activities.”

Link to the ESAs consultation paper:

Proposed definition of fossil fuel sector: 

Article 1


For the purposes of this Regulation, the following definitions apply:

(1) ‘fossil fuel sectors’ means investment related to production, processing, distribution, storage or combustion of solid fossil fuels, with the exception of investment related to clean vehicles as defined in Article 4 of Directive 2009/33/EC of the European Parliament and of the Council;

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