15 June 2021

Better Finance: Taxonomy Delegated Act Article 8 - Obligation for certain companies to publish non-financial information

The rules set out in the delegated act clarify and allow for the translation of the technical screening criteria of the Climate Delegated Act (and the future Environmental Delegated Act) into quantitative economic performance indicators that will need to be publicly disclosed.

BETTER FINANCE welcomes the Delegated act obligations for certain large undertakings to publish non-financial information. The rules set out in the delegated act clarify and allow for the translation of the technical screening criteria of the Climate Delegated Act (and the future Environmental Delegated Act) into quantitative economic performance indicators that will need to be publicly disclosed. Article 8(1) of the Taxonomy regulation requires certain large undertakings to disclose non-financial information under the non-financial reporting directive (NFRD). This directive defines how and to which extent the undertakings should disclose information associated to environmentally sustainable activities as defined by the EU Taxonomy.

Introduction

BETTER FINANCE welcomes the Delegated act providing obligations for certain large undertakings on criteriato publish non-financial information. The rules set out in the delegated act clarify and allowto translate the technical screening criteria of the Climate Delegated Act (and the future Environmental Delegated Act) into quantitative economic performance indicatorsthat will need to be publicly disclosed.

Article 8(1) of the Taxonomy regulation requires certain large undertakings to disclose non-financialinformation under non-financial reporting directive (NFRD). This directive defines how and to which extent the undertakings should disclose information associated toenvironmentallysustainable activities as defined by the EU Taxonomy. The key performance indicators (KPIs) disclosure, anounced in Article 8(2), specify three indicators: Turnover, Capital expenditure (CapEx) and operational expenditure (OpEx).1In order to strengthen market transparencyand encourage companies to green their activities and portfolios, it is crucial to have consistent and comparable disclosures on taxonomy alignment from financial and nonfinancial companies. Well-designed KPI-s are instrumental forenabling market participants to measure and reportthe taxonomy alignment and environmental sustainability oftheir activitiesas well for providingrobust transparency and allowingforwell-informed investment decisions. However, the Commission should provide help and guidance in interpreting the reported KPIs to ensure maximum clarity for users.

Alignment with the non-financial reporting directive

We believe that the delegated act should reinforce the alignment with the non-financial reporting directive. The disclosure of the KPIs and how to calculate them is extremely important but it is part of a larger sustainability disclosure framework.The taxonomy alignment of a company’s economic activities needs to be observed as part of a wider sustainability disclosure provided by the review of the NFRDand the initiative on the Corporate Sustainability Reporting. Therefore, in order to avoid misinterpretation and fragmentation of the sustainability disclosure of companies’ economic activities, the Delegated Act should make direct reference to the NFRD.

Assurance requirements 

The audit should be extended also tothedisclosure of the 3 KPIs (Turnover, CapEx and OpEx) in orderto guarantee robustness and the trustworthiness of the information provided. The initial review of the non-financial reporting directive set already a limited assurance. However, the auditing should be extended and applied as for the existing rules for financial reporting information, thus avoiding the risks of greenwashing practices

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