ESMA has launched a consultation on key performance indicators (KPIs) that corporates and asset managers should disclose to convey how their activities relate to those deemed environmentally sustainable under the EU taxonomy.
Under the EU taxonomy regulation, large listed issuers have to report on the proportion of their turnover, capital expenditure and operating expenditure related to activities deemed environmentally sustainable under the EU taxonomy framework.
The regulation does not specify any KPIs to be used by asset managers, but ESMA has proposed one for them, consisting of a ratio of eligible investments that are taxonomy-aligned.
It said that very few asset managers would be obliged to produce this based on current regulation, but that a forthcoming review of the Non-Financial Reporting Directive could bring more asset managers into scope.
The corporate-focussed part of the consultation is of immediate interest to more asset managers looking to use the EU taxonomy as a tool to inform their investment activity but also because they themselves are already facing taxonomy-referencing disclosure obligations at product-level.
Elizabeth Gillam, head of EU government relations and public policy at Invesco, said it was too soon for her to give a verdict on ESMA’s proposals on corporate taxonomy KPIs, but that as an early indicator the length of its consultation was encouraging.
“100 pages is quite long, and shows the level of detail they’re going into, which I think we’d see as probably quite a good thing,” she told IPE.
She explained that Invesco had previously told the European Commission there needed to be more detail on how companies should compute their taxonomy KPIs, so that the data being produced were comparable.
In the consultation paper ESMA said it had carried out targeted outreach with multiple stakeholders to ensure that its draft advice took into account key considerations in the market.
It said it had been been mindful of calls for consistency with regard to disclosure requirements on different market players, “for example in considering how the KPI disclosure of non-financial undertakings could be made most useful for financial market participants who will be making use of this disclosure for their own regulatory disclosure obligations”.
As concerns the asset manager KPI ESMA is proposing, the supervisory authority’s draft advice to the Commission is that the numerator should consist of “the value of green bonds complying with the EU Green Bond Standard and a weighted average of the value of the investments invested in Taxonomy-aligned activities of investee companies”.
The denominator, meanwhile, should consist of “the value of the total eligible set of investments in investee companies held by the asset manager’s funds, where eligible investments are equity and fixed income assets of eligible investee entities”.
The consultation can be found here. ESMA will consider all comments received by 4 December. It has to deliver its advice to the Commission by the end of February 2021.
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