On 5 November 2020, the European Securities and Markets Authority (ESMA) issued a consultation paper containing in draft form its advice to the European Commission (Commission) on Article 8 of the Taxonomy Regulation.

Article 8 of the Taxonomy Regulation obliges undertakings covered by the Non-Financial Reporting Directive to publish information on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation.

Article 8(2) requires non-financial undertakings to use three key performance indicators (KPIs), the proportion of their turnover, their capital expenditure (CapEx) and their operating expenditure (OpEx) related to environmentally sustainable activities. Article 8 does not specify any KPIs to be used by financial undertakings. Article 8(4) of the Taxonomy Regulation requires the Commission to adopt a delegated act to supplement the above obligations by specifying the content, presentation and methodology of the information to be disclosed by both financial and non-financial undertakings subject to the Non-Financial Reporting Directive. The Commission has to adopt the delegated act by 1 June 2021.

The draft advice is in response to a call for advice which the Commission sent to ESMA on 15 September 2020, requesting input on the following aspects of the delegated act which the Commission is to adopt:

• How should the three KPIs to be disclosed by non-financial undertakings be further specified?
• What information should any asset managers subject to the Non-Financial Reporting Directive disclose on how their activities are directed at funding environmentally sustainable economic activities?

In section 3 of the consultation paper ESMA sets out its draft advice concerning non-financial undertakings. In particular, ESMA addresses the content of the three KPIs which non-financial undertakings must mandatorily disclose and the methodology for preparing these. ESMA also covers considerations on the presentation of the KPIs within the non-financial statement. In section 4 of the consultation paper ESMA deals with the draft advice relating to the content of the KPI to be provided by asset managers and the methodology for preparing these. ESMA also covers the way in which the KPI should be presented.

The deadline for comments on the consultation paper is 4 December 2020.

The deadline for the advice is end of February 2021.