On 25 October 2023, the European Securities and Markets Authority (ESMA) published a summary of the findings from a fact-finding exercise on corporate reporting practices under the Taxonomy Regulation (Regulation (EU) 2020/852).
As part of its objective to coordinate European supervision and enforcement activities related to disclosures under the Taxonomy Regulation, ESMA collected information from national enforcers with respect to the Fiscal Year 2022 non-financial statements published by European nonfinancial undertakings listed in regulated markets. The aim of this fact-finding exercise was to evaluate the quality of the disclosures with which issuers have responded to the new requirements.
The fact-finding exercise highlighted the following:
- Almost all issuers, selected by the national enforcers among those being active in four main sectors covered by the Taxonomy Climate Delegated Act (Commission Delegated Regulation (EU) 2021/2139), disclosed the required Taxonomy alignment key performance indicators (KPIs) (96% of the sample).
- The reporting templates have generally been used, but for 30% of the sample they were either modified or not fully completed, which may impact comparability and make access to the data more difficult for users. Full reporting using the complete templates is mandatory.
- At least some of the mandatory qualitative information regarding the issuers’ assessment of their compliance with transparency requirements in relation to the nature of their activities, the technical screening criteria, the Do No Significant Harm (DNSH) criteria, and the minimum safeguards was missing or insufficient for more than 40% of the assessed issuers. In addition, only 40% of the sample provided comments on their eligibility or alignment rates.
- The operating expenditure (OpEx) alignment KPI was the KPI most often not reported (4% of the sample) or reported as zero (26% of the sample). Subject to conditions and specific disclosures, the Disclosures Delegated Act (Commission Delegated Regulation 2021/2178) makes it possible to claim a materiality exemption for the OpEx KPI. In the cases where such claim was made, however, the available information did not in general allow an external reader to assess whether the conditions for applying the exemption were met and/or some of the criteria attached to it were not respected.
- In addition to the points mentioned above, areas of incorrect application were spotted in relation to transparency on the avoidance of double counting, the screening of activities against one climate objective only or the reconciliation with financial reporting.
- Good reporting practices were also encountered, such as detailed explanations on the nature of activities or compliance tests, as well as links to the corporate sustainability strategy.
Based on these findings, ESMA reminds issuers of the importance of providing all quantitative as well as detailed qualitative information as required by the Disclosures Delegated Act, so as to enable users of the non-financial statement, including financial institutions, to fully understand to which activities the quantitative information relates, how the different criteria were assessed, and to get the issuer’s comments on its eligibility and alignment, where relevant.
ESMA strongly encourages issuers to use the guidance and tools that the European Commission has published, including guidance on the interpretation and application of certain criteria and disclosures, and online tools to assist undertakings in their Taxonomy reporting. ESMA also notes that the European Commission’s June 2023 Communication stresses the role of the Taxonomy as a “common language” which plays a key role in the EU’s Sustainable Finance framework, and which can be further used by undertakings to plan investments and set targets for their transition.