ESMA specifies obligations on environmentally sustainable activities - Consultation Draft advice to the EC on Article 8 Taxonomy Regulation
Last week, ESMA published its Consultation Paper containing ESMA’s draft advice to the European Commission on Article 8 of the Taxonomy Regulation. Article 8 requires undertakings that need to publish non-financial information pursuant to Directive 2014/95/EU (the ‘Non-Financial Reporting Directive’) to include in its non-financial statement information on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation. The paper specifies the content, methodology and presentation of the key performance indicators (KPIs) that non-financial undertakings and asset managers are required to disclose. The consultation closes on 4 December 2020.
The aim of the Consultation Paper is to ensure a consistent application of the disclosure obligations required under the Taxonomy Regulation by non-financial undertakings and asset managers that fall within scope of the Non-Financial Reporting Directive. In addition, the proposals are important to users of non-financial information as they provide legal certainty on the content of such disclosure.
Two key points following from the draft proposals:
- Concerning non-financial undertakings: the advice covers the content of the three KPIs, namely the proportion of turnover, and capital and operating expenditure related to environmentally sustainable activities which must be disclosed and set out specific considerations relating to the methodology for their preparation and presentation.
- Concerning asset managers: the advice proposes a KPI calculation model based on eligible investments; this comes together with advice on how this KPI should be calculated and presented to allow uniform disclosure on how the activities are directed at funding environmentally sustainable economic activities.
The Taxonomy Regulation is also closely linked with the Sustainable Finance Disclosure Regulation (SFDR). The Consultation Paper requests input on whether specific elements in the draft advice are sufficiently in line with the information needed by financial market participants in order to comply with their own obligations under the Taxonomy Regulation and the SFDR, or not. Reference is made to compliance with minimum safeguards such as the principle of do no significant harm within the meaning of the SFDR. However, the consultation paper does not provide further clarity on the alignment of that principle under the Taxonomy Regulation and SFDR.
ESMA will deliver its final advice to the European Commission by 28 February 2021. The Commission has to adopt the delegated act by 1 June 2021.