Draft RD of reports estimating the financial impact of climate risks
Spain: MINECOIn May 2021, the Spanish Parliament approved Law 7/2021 on climate change and energy transition with the aim of ensuring compliance with the objectives of the Paris Agreement of 2015 and facilitating the decarbonization of the Spanish economy. This Law incorporated in its article 32 a series of reporting obligations for companies in order to incorporate information regarding the level of exposure to climate and carbon risks and the strategies and objectives for their mitigation. In April 2023, the consultation period was opened for the draft Royal Decree (RD) on financial impact reports on climate risks, which develops Art. 32 of the Climate Change Law, with the aim of establishing the criteria for the preparation and publication of this report. The consultation closed on 5 May 2023.
Draft RD of reports estimating the financial impact of climate risks
Executive summary
Following the approval of the Climate Change Law, the Ministry of Economic Affairs and Digital Transformation (MINECO) has published the Draft Royal Decree on reports on the estimation of the financial impact of the risks associated with climate change, which develops art. 32 of the Act, for financial institutions, listed companies and other large companies in order to establish the criteria for the preparation and publication of financial risk reports. These institutions must publish the report on the estimation of the financial impact of the risks associated with climate change on an annual basis.
Main content
This Technical Note summarises the main elements included in the Draft Royal Decree:
- Scope of application and publication place of the report. Depending on their nature, each type of entity must include this information in a separate report:
- Companies, in the management report
- Credit institutions, in the prudential relevance report.
- Insurance companies, in the financial position and solvency report.
- Content of the reports:
- Governance structure of the organisation in relation to the identification, assessment and management of transition and physical risks, as well as climate-related opportunities.
- Processes for identifying, assessing, controlling and managing climate-related transition and physical risks and how these are integrated into its overall business risk analysis.
- Present and future transition risks and physical risks and climate-related opportunities existing at the time of reporting.
- Actual and potential quantitative and qualitative impacts of physical and transition risks and opportunities on the organisation's activities, strategy and financial planning.
- Strategic approach to managing climate-related risks as well as opportunities
- Metrics, scenarios and targets used to assess and manage relevant climate-related risks and opportunities and, if calculated, the scope 1,2 and 3 of its carbon footprint and how it addresses its reduction.
Next steps
- Entry into force the day after its publication in the Boletín Oficial del Estado (BOE).
- The companies and entities obliged by this Royal Decree may publish the information corresponding to the year 2022 in a separate document, without this implying the need to approve an amendment to the annual accounts.
Download the technical note on Draft RD of reports estimating the financial impact of climate risks (available only in Spanish).