European Securities and Markets Authority Publishes Final Report and Advice on KPIs and Disclosure Methodology Under Taxonomy Regulation

The European Securities and Markets Authority has published a final report and advice addressed to the European Commission on the key performance indicators and methodology that firms subject to the EU Taxonomy Regulation should adopt when disclosing information on the extent of their environmentally sustainable activities. The EU Taxonomy Regulation was published in June 2020 and establishes a classification system for sustainable activities to provide a consistent, EU-wide understanding of the environmental sustainability of activities and investments. The Regulation imposes an obligation upon EU firms that report under the Non-Financial Reporting Directive to disclose information on how, and the extent to which, their activities constitute economic activities that are "environmentally sustainable" for the purposes of the Taxonomy Regulation. Corporates will have to begin disclosing information on certain environmental objectives from January 2022, with disclosures on other objectives disclosed from January 2023. Most provisions of the Taxonomy Regulation have applied directly across the EU since July 12, 2020.
 
In September 2020, the Commission sought the views of the three European Supervisory Authorities on the KPIs and methodology that firms subject to the Taxonomy Regulation should adopt to comply with their disclosure obligations. The ESAs have provided individual responses relevant to the specific firms within their remit. ESMA's opinion provides recommendations for non-financial undertakings subject to the Taxonomy Regulation and asset management companies subject to the NFRD.
 
Non-financial undertakings
 
ESMA's report provides advice on how the three key KPIs applicable to non-financial undertakings (namely turnover, capital expenditure and operational expenditure) should be defined and provides advice on the methodology for calculating and reporting those KPIs. ESMA also recommends that firms should publish accompanying information alongside the KPIs (such as how they were prepared and what they cover) to help investors interpret them more easily.
 
Asset management companies
 
Asset managers subject to the NFRD should use a KPI based on the ratio of investments that are taxonomy-aligned compared to the value of all investments of the asset manager. ESMA also recommends the methodology and presentation to be used when preparing and reporting the KPI. ESMA proposes that the Commission develops a coefficient methodology that would enable asset managers to include in their KPIs investments in companies that do not report under the NFRD.
 
View ESMA's Final Report.
 
View details of the EBA's opinion and report on the KPIs and methodology.
 
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