We are broadly supportive of the proposal of the ESAs regarding the amendments to the regulatory technical standards for taxonomy-related sustainability disclosure. Find our full response here.
Through this consultation response, we want to emphasise three main points.
- One set of Regulatory Technical Standards – We fully support amending final RTS to have one set of SFDR RTS, including the original standards and the additional ones related to Taxonomy disclosures seems important for the simplicity of the legal procedure and to have a “single rulebook” for all sustainability-related disclosures.
- Choice of KPIs for alignment, but no blending of KPIs across portfolios – We support the proposal of the ESAs to apply one approach and use the same KPI (one out of turnover, Capex and Opex) for all investments when calculating the Taxonomy alignment of a financial product. Allowing a Financial Market Participant (FMP) to use a mix of KPIs (‘blending’) will make it more challenging to understand the level of alignment as it will require an analysis of the weighting methodology applied between Capex, Opex and turnover. Additionally, we think there is merit in distinguishing between pre-contractual disclosures and periodic reports. The former contains an ex-ante target or commitment by FMPs while the latter provide an ex-post report of how the portfolio has aligned with the Taxonomy during the report period. Therefore, we would understand having one KPI chosen by the FMP in pre-contractual disclosures while maybe having more KPIs such as turnover (revenues) and capex (planned investments for transition) in the periodic report.
- Alignment calculated over the entire portfolio of the product, regardless of whether the assets are assessable under the EU Taxonomy – Last, the denominator of the KPI should have all investments of the financial product, including sovereign bonds and other assets for which taxonomy alignments are challenging to assess. Excluding these assets from the denominator could artificially raise the share of taxonomy aligned investment by reducing the asset base in the denominator, hence including them is crucial for transparency and comparability purposes. ESMA also supported thisreasoning in its final report on Technical Advice on Article 8 of the Taxonomy regulation.
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Find our full response to the consultation here.