Leaseurope Task Force on ESG and Green Leasing - Navigating the Challenges of Sustainability Corporate Reporting for Leasing Companies

At the beginning of 2023, Leaseurope set up a new Task Force on Taxonomy Reporting, the objective of which has been to be a platform for experts to discuss, exchange best practices and, to the extent possible, work on a minimum approach specifying how leasing fits in the Taxonomy reporting. The EU Taxonomy Regulation establishes a classification of economic activities that can be considered environmentally sustainable when they contribute substantially to specific environmental objectives, such as reducing greenhouse gas emissions, preserving biodiversity, or transitioning to a circular economy. The Taxonomy Regulation requires a wide range of financial and non-financial undertakings to report on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable under its provisions.  

Over the last year, the Task Force established the specific challenges that exist for leasing companies to report in accordance with the Taxonomy Regulation. Particularly, the Task Force members worked on two aspects: a) determining how leasing can be considered as an environmentally sustainable activity as stipulated in the EU Taxonomy level two rules (Delegated Acts), and b) how to assess the Taxonomy eligibility and alignment of leasing activities to report under the EU Taxonomy requirements. The Task Force members provided valuable feedback on the first insights from the Taxonomy implementation which Leaseurope integrated in its various submissions to the public consultations launched by the European Commission and the EU Sustainable Finance Platform. In its submissions, Leaseurope successfully called for amending the Taxonomy-alignment criteria for the activity “Product-as-a-service” contributing to the objective on transition to a Circular Economy, and specifically the criterion of extended lifespan. Furthermore, Leaseurope called for further changes in criteria of the “Do No Significant Harm” principle for transport activities contributing to the Climate Change Mitigation objective as well as for explicit reference to leasing activities an enabling activity under an extended number of economic activities listed in the Taxonomy level two rules (e.g. energy, manufacturing, construction, etc.). Finally, the Task Force members dedicated a big part of their exchanges to the issue of whether operating leases can be included as Taxonomy-aligned activities to the Green Asset Ratio (GAR) that financial institutions are required to disclose.

At the beginning of 2024, the need to extend the Task Force’s remit became apparent to incorporate discussions and exchange of best practices on sustainability related issues wider than the EU Taxonomy. The Task Force has been renamed Task Force on ESG and Green Leasing and its work will also include issues such as reporting obligations under the Corporate Sustainability Reporting Directive (CSRD) and transition finance. The CSRD will need to be transposed into national law by each of the EU Member States by 6 July 2024 and will start to apply on or after 1 January 2024 (i.e. first report due in 2025) for companies already in scope of the NFRD. All other large companies will need to publish the first sustainability report in 2026 covering the financial year starting on or after 1 January 2025. SMEs will need to prepare the first report in 2027 covering the financial year starting on or after 1 January 2026 (with opt-out right until 2028). Lastly, the reporting obligations concerning third-country parent undertakings will enter into force for financial years starting on or after 1 January 2028, i.e. first report due in 2029.

The experts participating to the Task Force have started exchanging with regards to the CSRD obligation to report on scope 3 GHG emissions as well as to the CSRD materially assessment methodology, based on the guidance of the European Sustainability Reporting Standards (ESRS) which were adopted by the European Commission at the end of 2023. The Task Force on ESG and Green Leasing will continue convening regularly and be a platform for industry experts to exchange on sustainability, to identify the opportunities and the initial challenges in transitioning to a greener economy and to further promote general, not only strictly green, transition finance projects.