Response to EIOPA consultation on Taxonomy Regulation Article 8

11 January 2021

Consultation response

Finance Watch published on 11 January 2021 its response to the EIOPA’s consultation on the draft advice to the European Commission under Article 8 of the Taxonomy Regulation.

  • Disclosures under Article 8 of the Taxonomy Regulation will serve as a basis for developing Taxonomy-related disclosures by financial market participants. Their appropriate calibration  helps ensure that the EU Taxonomy Regulation delivers on its aims.
  • Finance Watch suggests to harmonise corporate disclosures deriving from Article 8 of the Taxonomy Regulation to the furthest extent possible. This would contribute to enhanced consistency and comparability of information for investors and other information users. Reporting companies would also benefit from clarity on how to prepare the disclosures.
  • Overall, the approach followed by EIOPA reflects well the specificities of insurance and reinsurance undertakings’ business models. The reasoning follows aims for the best equivalents of the mandatory ratios of non-financial undertakings, as set out by Article 8, being turnover from the EU Taxonomy-aligned activities and CAPEX and OPEX linked to the EU Taxonomy aligned activities. The approach taken, however, would result in metrics not sufficiently comparable with those proposed by ESMA for the asset management industry.
  • While in both cases one of the metrics is intended to reflect assets invested in the EU Taxonomy aligned activities, the underlying components seem to differ (e.g., regarding the inclusion of assets for own use). Moreover, in case of EIOPA, the metric is seen as the CAPEX / OPEX equivalent, while in case of ESMA, the metric is observed as the equivalent of turnover in case of non-financial undertakings. This could result in comparing apples with oranges which could eventually result in misleading fund disclosures on their alignment with the EU Taxonomy economic activities.
  • In terms of process, Finance Watch regrets that the EBA has not launched a fully-fledged public consultation on the Article 8 Taxonomy-related key performance indicators for credit institutions. Running the respective consultations in parallel by the European Supervisory Authorities would have been helpful to better inform our thinking and ensure a consistent approach.