ESMA and EBA technical advice to EC on the Taxonomy Disclosures Delegated Act

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have published their respective final reports setting out their technical advice to the European Commission (EC) on proposed amendments to certain key performance indicators (KPIs) under the Taxonomy Disclosures Delegated Act. This follows the EC's March call for technical advice to support its review of the taxonomy reporting framework. The review forms part of the EC's broader omnibus simplification agenda and aims to reduce reporting burdens while maintaining meaningful sustainability disclosures for investors.

ESMA's report recommends narrowing the mandatory operational expenditure (OpEx) KPI to non-capitalised research and development expenditure. It also proposes simpler group reporting, including the removal of the weighted-average KPI, and targeted measures to make disclosures more proportionate, clearer and easier to use.

The EBA's report focuses on five areas, namely:

• removing the fees and commissions KPI and the trading book KPI from the taxonomy disclosure requirements
• simplifying the investment firms' 'other services' KPI, including services related to capital markets
• aligning the grandfathering provisions with the EU Green Bond Regulation, limited to bonds issued under that Regulation
• not including the OpEx KPI disclosed by non-financial undertakings in the calculation of financial undertakings' KPIs
• simplifying group disclosures by using the parent undertaking's KPIs and, where relevant and subject to defined conditions, complementing them with KPIs for material secondary activities, without further aggregation.

The EBA also recommends targeted improvements to the broader disclosure framework. These include simplifying and harmonising the templates for credit institutions' asset management activities, asset managers' activities and investment firms' activities, and simplifying and clarifying the Green Asset Ratio templates for credit institutions. The EBA's report is accompanied by a letter from its chair addressed to the EC.

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