Large companies will have a new communication obligation in connection with the climate crisis. The Ministry of Economy has initiated a draft royal decree regulating the content that companies must disclose. financial implications of climate change in your activity.

will listed companiesconsolidated groups of credit institutions and credit institutions non-integrated, insurers and reinsurers, as well as their consolidated groups. This report must also be submitted by companies that are required to include a statement of non-financial information in the consolidated management report, that is, large companies.

The report must include how the climate crisis affects planned investments, as well as income and expenses and the financial position of the organization. This document, which each company must publish on its corporate website, should include the risks and opportunities arising from the climate.

The required information is divided into four sections. The first, related to e.expected organizational structure control risks and opportunities. Secondly, blows what these already identified risks have for the strategy and financial planning of the company. The third section is related to processes used to identify, evaluate and manage risks. Finally, it is necessary to find out which metrics and goals to manage risks as well as opportunities weather related.

As outlined in the public comment paper, companies should describe what processes they have in place to identify, evaluate and manage transition and physical risks. Among the first are changes in consumer behavior, an increase in the cost of raw materials, or new rules that may appear.

For physical riskseach organization must assess the increase in the severity of meteorological events, as well as issues such as average temperature rise or sea level rise, according to an annex prepared by the Ministry of Economy.

This information should also include the governance structure responsible for assessing the above aspects, as well as the frequency of reporting to the risk management board and the opportunities associated with the climate crisis. If there are specific departments or mechanisms, then be sure to indicate this in the report.

While most companies already include an environmental commitment to reduce their carbon footprint in their annual reports, they should also include this information in this document.

Finally, weather related features should also be included. In other words, these are “potential positive effects for society”. Among them, the Ministry of Economy includes examples such as access to new markets, diversification of resources, or the use and production of processed products.

Adapt to European standards

The obligation to submit this report stems from the Climate Change and Energy Transition Act 2021 and involves the adaptation of the Sustainable Finance Action Plan agreed at the European level. This plan includes in its third section “publication of information to reduce information asymmetries and enable the market to judge the capabilities of the tools used to achieve environmental goals”, including a draft Royal Decree.

Thus, this royal decree implies the application of the European Directive on the publication climate and transition risks which implies its economic activity.

Information on environmental issues

In addition to this draft royal decree, the Ministry of Economy has opened for public hearing a draft law regulating the structure of corporate information on environmental, social and governance issues.

Once approved, information on the business model and strategy, objectives, administrative bodies, policies, due diligence procedures, value chain, key risks and performance indicators will become mandatory, among other things.