On 1 March 2021, the European Securities and Markets Authority (ESMA) published its final report on advice under Article 8 of the Taxonomy Regulation, which covers the information to be provided by non-financial undertakings and asset managers to comply with their disclosure obligations under the Non-Financial Reporting Directive (NFRD).
According to Article 8(1) of the Taxonomy Regulation, undertakings required to publish non-financial information pursuant to Articles 19a and 29a of the Accounting Directive have to include information on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation. For this purpose, Article 8(2) of the Taxonomy Regulation requires non-financial undertakings subject to the NFRD to provide disclosure of three key performance indicators (KPIs): turnover (turnover KPI), capital expenditure (CapEx KPI) and operating expenditure (OpEx KPI) related to environmentally sustainable activities. The Taxonomy Regulation, however, does not specify any KPIs for financial undertakings (including asset managers) which are subject to the disclosure requirements for non-financial information in the Accounting Directive. Article 8(4) of the Taxonomy Regulation requires the Commission to adopt a delegated act to supplement Article 8(1) and (2) by specifying the content and presentation of the information to be disclosed pursuant to those paragraphs, including the methodology to be used in order to comply with them, taking into account the specificities of both financial and non-financial undertakings and the technical screening criteria established pursuant to the Taxonomy Regulation. The Commission is required to adopt the delegated act by 1 June 2021.
ESMA’s advice on the KPIs that will be disclosed by non-financial undertakings provides the definitions that entities should use for the calculation of the three metrics namely the turnover KPI, the CapEx KPI and the OpEx KPI. The advice also sets out the content of the information that should accompany these disclosures and the level of granularity that should be provided to comply with these reporting obligations. ESMA has mainly focussed on activities that are covered by the EU Taxonomy (activities that are ‘eligible’ to qualify as environmentally sustainable for the formulation of its proposals on non-financial undertakings). On asset managers, ESMA proposes the KPI that asset managers should disclose along with a number of methodological considerations relating to the calculation of this metric. ESMA proposes the use of standardised tables for the Article 8 disclosures by non-financial undertakings and asset managers and recommends a transitional application of the Level 2 provisions.
The final report will be delivered to the Commission.