Response to the ESMA consultation on Art 8 Taxonomy-related disclosures

04 December 2020

Consultation response

On 4 December 2020, Finance Watch has published its comments on the ESMA’s draft advice on disclosures under Article 8 of the Taxonomy Regulation.

Article 8 disclosures will serve as a basis for developing the Taxonomy related disclosures by financial market participants. Their appropriate calibration is important to ensure that the EU Taxonomy Regulation delivers on its objectives.

Finance Watch suggests to harmonise corporate disclosures stemming from Art. 8 of the Taxonomy Regulation to the extent possible. This would contribute to the enhanced consistency and comparability of information for investors and other information users. Clarity on how to prepare the disclosures can also help the reporting companies.

Key points of the consultation response:

  • While we have concerns over comparability of KPIs disclosed by non-financial undertakings and those by financial market participants, we agree that a share of investments is an appropriate KPI for asset managers. We strongly believe that all investments (apart from sovereign bonds) should be considered eligible, not restricting the scope to funds or to investments meeting some kind of sustainability criteria (e.g. Art. 8 or Art. 9 products).
  • Making estimates based on sector-coefficients would be misleading and against the logic of the EU Taxonomy which is intended to result in granular, scientific and reliable disclosures. Companies within the same sectors may have a very different alignment of their economic activities with the Taxonomy. It would also not account for the transition or enabling economic activities which concerns only some of companies within a sector.
  • We support a proposal to require undertakings to disclose information in a standardised table which would enhance comparability of the information disclosed.
  • We suggest to require providing KPIs’ comparatives over a period of five years. This will enable investors and other users to properly assess the company’s progression.
  • Methodologies used by companies will differ, for instance depending on the accounting standards used for preparing financial statements. Therefore, accompanying information is of key importance to provide investors with the context they need to understand and assess the indicators.
  • Accompanying information should be presented in the vicinity of the KPIs. In case there are reasonable practical impediments, compliance by reference could be allowed as long as the accompanying information is part of the non-financial statement and a link and a page number is provided, enabling easy access to the information.
  • We agree with ESMA that non-financial undertakings should disclose the KPIs separately for economic activities which are Taxonomy-aligned, economic activities which are covered by the Taxonomy but are not aligned as well as for economic activities which are not covered by the Taxonomy. Furthermore, we believe it would be useful that companies also provide information on what is the proportion of economic activities that could not be assessed due to the absence of data.