CSRD and EU Taxonomy within Belgian Banks

The fiscal year (FY) 2025 placed Environmental, Social, and Governance (ESG) reporting in the European Union (EU) at a crossroads. While the Corporate Sustainability Reporting Directive (CSRD), related European Sustainability Reporting Standards (ESRS), and the EU Taxonomy regulation are still in their initial stages, organizations - including financial institutions - have been required to future-proof their reporting practices amid ongoing regulatory developments. The Omnibus II simplification package is likely to drive significant changes to the format and content of CSRD and EU Taxonomy disclosures next year.

To understand how the Belgian banking sector navigated regulatory uncertainty and ESG reporting development, KPMG Belgium performed a benchmarking of annual and sustainability reports FY 2025 of the six largest Belgian banks: KBC, BNP Paribas Fortis, Belfius, ING Belgium, Crelan, and Argenta.^[1]

There is a gradual shift from initial compliance efforts towards consolidation, strategic focus, and improved clarity. Given the uncertain regulatory environment, banks maintained a status quo approach, consolidating efforts and quick fixes vs. structural changes. Certain aspects have been streamlined, such as the volume of Impacts, Risks, and Opportunities (IROs) disclosed, which has significantly decreased, making double materiality a pragmatic tool to focus on what is most decision‑useful. Other aspects have been developed, such as the ESRS phase‑in options, which are used less frequently than they were in 2024.

There is a transition from intent to execution on climate change, but the maturity of banks’ climate transition plan and targets differs significantly. Certain institutions have formalized and validated transition plans at the executive level, complete with measurable goals; others are starting with specific initiatives. Nonetheless, most panel institutions have shown positive developments.

While the operational decarbonization within banks is well underway, most of their emissions are included in their financed emissions (Scope 3, Category 15). Scope 1 and 2 emissions and intensity ratio declining, but IT-related emissions should remain on the radar. Nevertheless, these emissions represent only a marginal share of banks’ overall climate impact. Financed emissions drive banks’ climate footprints. The evolutions from last year remain diverse across the panel and the dynamics are varied due to methodological developments, as well as shifts in the composition of companies’ loan and investment portfolios.

Social disclosures on own workforce (ESRS S1) remain regulation-driven but are stable and developed. Metrics and targets published by financial institutions on ESRS S1 are stable compared to last year and sub-topics are comparable across institutions, showing relative maturity. The development of metrics and targets is influenced by regulatory requirements such as the EU Women on Boards Directive 2022/2381 and EU Pay Transparency Directive 2023/970. Therefore, diversity and non-discrimination clearly emerge as the predominant sub-topics across banks.

Social disclosures on consumers and end-users (ESRS S4) are primarily triggered from a risk perspective but are less developed, more volatile year-on-year, and sub-topics remain more heterogenous between banks compared to ESRS S1 disclosures. The heterogeneity of ESRS S4 metrics and targets limits their comparability across entities. Moreover, the number of disclosed targets and metrics remains low. However, the absence of reporting on a specific metric or target does not reflect the absence of underlying actions or initiatives by the financial institution, calling for a cautious interpretation. The most common sub-topics are information and data security, financial inclusion, and customer relations. Financial inclusion metrics notably show an overall positive trend and are expected to increase in the coming year with the EU Accessibility Act Directive 2019/882 implementation.

ESG reporting remains a complex exercise. While financial institutions have improved their reporting practices, regulatory interpretation and challenges are still present this year. The heterogeneity that was observed last year in the sustainability reports has not been completely resolved. Some topics are still more mature than others. However, an effort to streamline, focus on what truly matters, and tackle more complex workstreams have been observed.

The focus of reporting in the coming years will be on banks to reduce the “say–do” gap, translating their targets into actionable elements, while enhancing data collection and leveraging sustainable value proposition.

The future of ESG reporting is still uncertain. Sustainability reports are expected to change next year, depending on the final Omnibus II simplification package and its adoption.

• This report is the new edition of the benchmarking published last year by KPMG Belgium, which illustrated the significant elements of ESG reporting for the FY 2024 (2024 report on Embedding sustainability within Belgian banks). While many of the observations remain relevant for this year, this report focuses more on the new elements emerging for the FY 2025 and comparison with last year. 

_{1. Disclaimer: comparability across institutions is sometimes constrained due to differences in scope, methodologies, data, metrics, and targets.}