ESG Reporting under Article 449a of the CRR: Experiences and Recommendations of Czech Banks

On November 5, 2024, ARM organized a panel discussion on ESG reporting under Article 449a of the CRR. We would like to thank the panellists, Ms. Valerie Novotná and Mr. Martin Trnovec (Česká spořitelna, a.s.), Ms. Mária Valouchová (Komerční banka, a.s.), and Mr. Michal Putna (Raiffeisenbank a.s.), as well as more than 90 participants from the Czech Republic and Slovakia, for an engaging discussion and for sharing their experiences.

Before we summarize the key conclusions of the panel discussion, let us briefly introduce the main regulatory requirements.

Introduction and Summary of the Regulation

From 2025, Article 449a of the CRR introduces a new ESG reporting requirements for all institutions (previously, it only applied to large institutions with securities admitted to trading on an EU-regulated market). The reported information focuses mainly on physical and transition risks in the portfolio and sustainable financing.

The templates for reporting under Article 449a are currently included in annex to EU Regulation 2024/3172 (previously in EU Regulation 2021/637). These consist of three tables with qualitative information on E, S, and G factors, as well as 10 tables with quantitative portfolio data.

Quantitative data includes, for example, financed emissions or the GAR (Green Asset Ratio) and BTAR (Banking Book Taxonomy Alignment Ratio) indicators. While some reported data overlaps with reporting under EU Regulation 2021/2178 (disclosures in annual reports), differences in calculation methods must be taken into account.

Panel Discussion Highlights

According to the panellists, the main challenges lie in the following areas:

• Data Collection from Clients: Obtaining sufficient and high-quality data to assess client activity alignment with taxonomy and calculate financed emissions remains a significant challenge for banks. While the situation is gradually improving, particularly due to the development of ESG questionnaires, gaps persist, especially with companies outside the scope of CSRD. This is often due to client uncertainty about obtaining or correctly calculating certain information. Banks frequently use a combination of internal tools and external platforms, such as Synesgy, to improve data availability and quality.
• BTAR Calculation: Calculating the BTAR indicator is significantly more complex than the similar GAR indicator. BTAR requires an assessment of sustainability for businesses outside the CSRD scope and for non-financial entities outside the EU. Thus, despite banks already having mechanisms for GAR data collection and calculation, BTAR remains one of the biggest challenges.
• Limited Use of Information: Due to simplifications, limitations, and different methodologies in data collection and indicator calculations, disclosed information is currently less suitable for benchmarking between institutions. Similarly, its use in internal ESG risk management will require further development and standardization to enable better comparability and data reliability.
• Decarbonization Strategies: Panellists noted that bank decarbonization strategies often focus on gradually reducing financing for clients in sectors such as coal mining and processing. However, the key task remains setting realistic and achievable goals that consider the limited availability of client data while being firmly tied to specific actions. Panellists also emphasized the need to shift strategies toward leveraging decarbonization opportunities rather than merely reducing activities with negative impacts.

Recommendations for Institutions Preparing for Article 449a CRR Reporting

Panellists provided the following recommendations for institutions preparing for reporting under Article 449a of the CRR:

• Map out reporting requirements;
• Use the most of already available information and data collection processes;
• Integrate reporting-related processes into regular operations (including assigning clear responsibilities for each part of the process);
• Start collecting data from counterparties well in advance;
• Do not underestimate client communication (in terms of time, capacity, and the need to educate counterparties).

ARM Services Related to Article 449a CRR Reporting

ARM can support your organization with various aspects of Article 449a CRR reporting, including:

• Creating an overview of the data required for reporting under Article 449a CRR;
• Developing/assessing methodologies to determine the eligibility/alignment of exposures with taxonomy criteria;
• Calculating GAR and BTAR;
• Calculating financed emissions;
• Completing templates for reporting under Article 449a CRR;
• Creating/updating decarbonization strategies and transition plans (including goal definition, related indicators and timelines, role and responsibility setting, etc.).