- Finance Watch favours the creation of a “single rulebook” for sustainability disclosures with the aim to reduce the complexity, duplication, potential inconsistencies or overlaps.
- DNSH criteria: we call against exempting EU taxonomy-compliant investments from screening against the “Do No Significant Harm” (DNSH) criteria in SFDR.
- Funds’ taxonomy-alignment ratio:
- Leaving flexibility to a financial market participant (FMP) to choose between three metrics (the taxonomy-aligned turnover, CAPEX or OPEX), in case of non-financial companies, when calculating fund’s taxonomy-alignment ratio, could result in major greenwashing and insufficient comparability across funds or the end-investors.
- Instead, FMPs should calculate a weighted average ratio composed of the taxonomy-aligned turnover, CAPEX and OPEX for each non-financial company within a fund. The respective weights should reflect the relative proportion of turnover, CAPEX and OPEX.
- Derivatives should be assessed by their nature when calculating funds’ taxonomy-alignment ratio.
- Their gross positions can be included in the fund’s taxonomy-alignment ratio when they are used for hedging purposes of investments in taxonomy-aligned economic activities.
- Short exposures to taxonomy-aligned investments should be netted.
- Derivatives that meet neither of the above two conditions, should be excluded from the numerator of the fund’s taxonomy-alignment ratio. However, they should be included in the ratio’s denominator covering all investments.
- We call for a mandatory external verification / assurance of the taxonomy alignment disclosed by investee companies in line with Art. 8 TR as well as the taxonomy alignment disclosed by FMPs in line with Art. 5 and 6 TR. This is essential to avoid greenwashing and provide certainty and reliability of information to end investors.
Regulation(s) covered in this publication
- Sustainable Finance Disclosure Regulation (SFDR)
Our response to the ESAs consultation on EU taxonomy-related sustainability product-level disclosures has been submitted and is now public. Some of the key messages are: