EUU, Alm.del - 2020-21 - Bilag 375: Notat samt høringssvar vedr. etablering af en fælles europæisk indgang til offentlige finansielle og ikke-finansielle virksomhedsoplysninger

Europaudvalget 2020-21
EUU Alm.del Bilag 375
Offentligt

12 March 2021

Annex 2: Scope of ESAP (question 7) - Opportunities and challenges

The Danish Government generally welcomes the idea of digitalising public

reporting and providing one single access point for investors and other

stakeholder to find and compare financial and non-information about com-

panies. In achieving this ambitious goal, we see both opportunities and

challenges. In this section we will outline them in turn focusing on each of

the acts listed.

Legal acts where inclusion in ESAP would be beneficial

The upcoming revision of the

Non-Financial Reporting Directive

will

potentially include ESG data and information to be reported by non-finan-

cial companies. This data will likely feed into the demands for ESG infor-

mation that the SFDR and Taxonomy regulation will require financial mar-

ket participants to disclose about underlying investments in financial prod-

ucts. Therefore, the revision of NFRD and the data it provides will play a

key role in ensuring transparent information about ESG risks on financial

markets. Considering the important role of information on sustainability for

financial markets, the new sustainability related data provided by a revision

of NFRD might be a good place to start for an ESAP solution and we see

an opportunity to create much needed transparency and comparability.

However, in doing so it is important to establish standardized digital re-

porting, respecting the existing flows to Officially Appointed Mechanisms

(OAM’s) and without creating data validation burdens on national author-

ities. Further analyses of how the inclusion of sustainability data can be

done through an extension to national solutions would be purposeful.

ESG risks

can have material impact on investments and there is currently

a lack of data, particularly comparable data in the area. Therefore, infor-

mation on how risks are taken into account and how underlying invest-

ments fare in terms of ESG factors could be a very relevant area for inclu-

sion into the ESAP. The reporting templates being set out in accordance

with the Sustainable Financial Disclosure Regulation (SFDR) will also re-

sult in standardized information thus making the process for implementa-

tion less costly with regards to data validation. Information related to sus-

tainable benchmarks could also be relevant to include in ESAP as there

continues to be a void in the private arena in that area and it can more eas-

ily be designed to fit to ESAP. However, much of the information to be

published in accordance with the SFDR will be information available on

financial market participants’ webpages. Attaining such information even

EUU, Alm.del - 2020-21 - Bilag 375: Notat samt høringssvar vedr. etablering af en fælles europæisk indgang til offentlige finansielle og ikke-finansielle virksomhedsoplysninger

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for NCAs is going to be a technically challenging issue with specific data

retrieval processes, which might be too burdensome and difficult to pro-

cess for an ESAP solution. Considering the vast amount of information in

the sphere of sustainability we urge the Commission to ensure that the

“file only once”-principle

is upheld. We would support the inclusion of

SFDR and Taxonomy relevant data into ESAP provided this can be done

with a simple solution built on OAMs.

On the matter of the

Short Selling Regulation

we note that a net short

selling position above 0.5 per cent of a listed firms issued share capital is

to be published each day at the relevant NCA’s web page according to the

short selling regulation. This information is highly demanded by both retail

and professional investors, as they are likely to benefit from comparing the

net short selling positions across different firms. This indicates that an

ESAP would be highly appreciated among investors thus meriting an in-

clusion. The NCA’s already transfer

the data on a regular basis to ESMA

indicating that a transmission to an ESAP is also possible. If considered

one must also look into issues regarding the timing of transmission of the

information from one system to another.

The Danish Government supports transparency regarding e.g. remunera-

tion reports. However, it is unclear which information the companies

should disclose from the remuneration report. It is a concern that the

Share-

holder Rights Directive

is unclear as regards to e.g. how share-based pay

is valued which is why it becomes difficult to compare remuneration, in-

cluding across borders. Furthermore, the European Commission has not yet

published the guidelines on standardized presentation of the remuneration

report. When this is clarified, we would support an inclusion in the ESAP.

On the matter of the

Accounting Directive

we support the implementation

of the information in ESAP. In Denmark we already receive this infor-

mation in XBRL and inlineXBRL for all non-financial companies, subject

to the Danish Financial Statement Act. It would be most welcome to make

this information available in ESAP. It should be noted that the information

from the annual reports might not be comparable, as the member states can

choose different options for recognition and measurement. However, data

availability will be an advantage.

Legal acts where the benefits of inclusion in ESAP are unclear or lack de-

mand

We do however also see certain challenges with including many of the acts

mentioned in the table in question 7 in ESAP. Generally, we must stress

that financial companies operating in the capital markets publish a consid-

erable amount of information. Therefore, implementation of an ESAP reg-

EUU, Alm.del - 2020-21 - Bilag 375: Notat samt høringssvar vedr. etablering af en fælles europæisk indgang til offentlige finansielle og ikke-finansielle virksomhedsoplysninger

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ulation covering capital market participants would have considerable ad-

ministrative consequences imposing significant burdens to the capital mar-

ket sector since it would require resources (IT, human etc.) in order to en-

sure due compliance with the requirements. We would therefore like to un-

derline that such a database should not abolish well-established market-

based solutions, should build on existing solutions and be based on a thor-

ough analysis of information demand, added value and assessment of ad-

ministrative, supervisory and IT burdens and consequences.

There is great variance in the relevance and feasibility of the inclusion of

data under the

Transparency Directive

in an ESAP solution. Financial re-

ports could be information relevant for sharing in an ESAP solution, par-

ticularly considering that they are already being reported through standard-

ized formats. However, this is not the case for all information relevant un-

der the Transparency Directive. We therefore propose to take a cautious

approach where not only a comprehensive mapping is done but also imple-

mentation is done with respect to the current Officially Appointed Mecha-

nisms (OAM’s) and standardization of reporting formats occurs through

revision of regulation. Inclusion of non-standardized information would

create burdensome data validation processes for national authorities, which

would not align with the scope of possible benefits. Moreover, it would not

help the users of ESAP with comparing companies’ performances, as the

data would not be comparable.

It is unclear how information given under the

Prospectus Regulation

would be beneficial in an ESAP solution. Prospectuses are currently pub-

lished where the entities’ stocks are to be traded, on the issuers’ website,

on NCA’s websites as well through the ESMA prospectus register, where

the NCAs facilitate the upload to the two latter systems. Moreover, many

are written in the national language, i.e. in Denmark in Danish. Considering

these aspects, we see little benefit of including them in ESAP. If prospec-

tuses were to be included, it should be on the basis of transmission from

the ESMA register thus avoiding further reporting burdens.

In the area of

Market Abuse

information on inside information, managers’

transactions etc. might be of relevance to investor decisions. However, this

information is already in the OAM and as the timeliness and precision in

this area is very important it is unclear how a transfer of data to ESAP

would retain the integrity, i.e. not compromise these aspects. We therefore

urge to take a cautious approach with thorough mapping and cost-benefit

analyses before introducing this as part of an ESAP, and thus this should

only be considered at a later stage.

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The exact benefits of including information from the realm of the

Directive

on Takeover bids

are unclear to us. This information is in principle di-

rected towards existing shareholders and has the vital requirement of actu-

ally reaching all relevant jurisdictions given the nature of the information.

We believe further clarification through a mapping and cost-benefit analy-

sis is necessary to assess any further benefit form inclusion in the ESAP as

well as costs for changing OAM’s and the non-standardized

formats.

In the area of

MIFID

we draw attention to the fact that a vast amount of

information is already available through private market actors such as

Bloomberg, Eikon, etc. on the issue of transaction transparency. For in-

stance, according to Bloomberg’s own marketing material they have devel-

oped a large-scale set-up to address the market and information fragmenta-

tion. As a result, they currently cover approximately 90% of all equity

trades in the EU. While there might be further non-aggregated information

in the area of Approved Public Arrangements (APAs) the European Com-

mission is already looking at initiatives to establish a consolidated tape pro-

vider (CTP) to increase trade transparency and handle the market data is-

sues even though the business case for this project is still uncertain. There-

fore, a market failure or information gap in this area is not evident, and

there is a strong risk of duplicating efforts if this area is included in the

ESAP. The comparative advantage of an ESAP solution therefore remains

unclear, and we would not recommend the Commission to include this area

in ESAP.

Sectors where the benefits of inclusion in ESAP lack demand

In the area of

Pension and Insurance

we believe that the relevant infor-

mation for investors would be that reported in accordance with the NFRD

and the coming SFDR. Therefore, we do not see the case for further pub-

lication or inclusion of information in the ESAP. We also note that in

Denmark a large amount of insurance companies as well as IORPs are

owned by the members and very few are listed companies, thus there

would generally be no public interest nor investment decisions to support

that would warrant inclusion in the ESAP.

Further to the area of MIFID and

investment funds

we see no need for

establishing an EU-wide database allowing for the comparison between

different types of investment products accessible across the EU. Enhanced

transparency enabling investors to more easily compare different types of

investment products accessible across EU are more adequately achieved by

ensuring that national competent authorities are granted sufficient powers

to take the needed supervisory measures to enhance transparency of acces-

sible investment products. We kindly refer to the same Danish response to

Q37 in the recent public consultation on the review of the MiFID II/MiFIR

regulatory framework as submitted on 15 May 2020. In this manner, it is

EUU, Alm.del - 2020-21 - Bilag 375: Notat samt høringssvar vedr. etablering af en fælles europæisk indgang til offentlige finansielle og ikke-finansielle virksomhedsoplysninger

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also possible to ensure incorporation of well-established behavioural stud-

ies to support investor and consumer activity as well as cater for accessi-

bility of information for the end-users. These comments do not concern

ESG-aspects, as covered above.

An important aspect to take into account is that when companies disclose

investor documents in accordance with the EU-regulation such as MIFID,

UCITS, AIFMD and PRIIP-regulation , these documents are usually dis-

closed in the national language (i.e. in Danish in Denmark). This is required

to ensure the document is an appropriate tool to increase the transparency

and reduce asymmetry of information between the company and investors.

Since documents are disclosed in national languages, may be adapted to the

specific national investor protection needs, particularly for retail investors,

and cannot nor should stand alone without adequate investment advice and

product governance rules, we see little to no merits of letting such docu-

ments be included in an EU-wide database.

With regard to the

Covered Bonds

we see merit in having a European so-

lution providing for transparency and access of information to investors.

However, there is already a well-established market-based solution pro-

vided by the European Covered Bond Council/European Mortgage Feder-

ation (EMF/ECBC). This solution not only established a Harmonised

Transparency Template, and the legal requirements of the Covered Bonds

Directive with regard to investor information and quarterly publication to

the public

of information reflects the practice established by the “Covered

Bond Label”. We kindly also refer to the fact that the broadly supported

foundation for negotiations of this directive was to ensure the continuation

of this market-based system and prevent unnecessary bureaucracy or bur-

dens for the issuers by additional reporting requirements or systems. This

basis should not now be undermined. Any inclusion of this area should

therefore seek to build upon the existing solution.

Regarding

the BRRD, CRD, CRR, CSD, EMIR, SFTR, IORP, Solvency

as well as broadly the rules concerning

investment funds

it is currently

far from obvious that there is a demand for this type of information from a

sufficiently large number of investors which would justify inclusion in the

ESAP. Furthermore, it is likely to be sophisticated investors that demand

this type of information making it more likely that they will need additional

information than what could be provided through ESAP. Hence, this should

be carefully analysed in a cost-benefit analysis. Specifically, on the CRR

we might see a possibility to include pillar III reports in accordance with

section 8 of the CRR in the ESAP. That said we do not see these risk reports

as the primary sources of relevance for an investment decision and thus,

also not primary to achieving the aim of the CMU and the ESAP by remov-

EUU, Alm.del - 2020-21 - Bilag 375: Notat samt høringssvar vedr. etablering af en fælles europæisk indgang til offentlige finansielle og ikke-finansielle virksomhedsoplysninger

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ing barriers to investments in the EU. However, the EBA is already con-

templating work in 2022 on creating a central hub for the publication of

this information. It is therefore highly relevant to consider how to avoid

duplicative work and burdens on all authorities as well as stakeholders.

In conclusion, we support the goal of an ESAP for financial and non-finan-

cial information. As outlined, we do however see many challenges and

risks of overlaps with existing systems as well as privately provided ser-

vices. We therefore strongly recommend that a thorough mapping and cost-

benefit analysis is performed to allow the Commission to move swiftly for-

ward in the areas where there is a strong demand and need for transparency

and easily accessible comparable data, such as for ESG data, while waiting

or even refraining from including very specialised data only relevant to a

subset of investors.

In this regard, we find that only considering inclusion based on two scenar-

ios of “immediately” or “at a later stage” is not specific enough for an ex-

ercise of this magnitude. Considering the potential vastness of the scope

we strongly encourage a further stepwise inclusion process to be consid-

ered, potentially also considering different parts of the directives, or apply-

ing the requirements to certain sizes of companies or companies within cer-

tain sectors in a first step.