Europe’s financial supervisors have launched consultations on simplifying disclosures under the EU’s Taxonomy Regulation.
The European Insurance and Occupational Pensions Authority (EIOPA), the European Securities and Markets Authority (ESMA), and the European Banking Authority (EBA) were asked to provide advice to the European Commission on streamlining the green taxonomy as part of its efforts to cut reporting requirements in the region.
On Wednesday, ESMA and EIOPA both released consultations on their current thinking. ESMA proposed several simplifications to the Taxonomy’s disclosure framework for companies and asset managers.
These include requirements around operational expenditure (OpEx), which many stakeholders say are currently too complex and not useful.
ESMA sets out a number of alternative approaches for OpEx disclosures, ranging from targeted tweaks to a complete overhaul of the current regime, but currently favours the idea of limiting such disclosures to research and development (R&D).
If a company is spending a material amount on green R&D, it would indicate the business was positioning itself to become greener, but investors wouldn’t have access to that information via the Taxonomy’s other disclosure categories, which are dedicated to revenues and capital expenditure.
Therefore, ESMA doesn’t want to remove that element of the OpEx requirements.
“ESMA is also consulting on the possibility of accompanying this revised mandatory OpEx KPI with optional reporting of an additional KPI (OpEx+), capturing other operating expenditures relevant to an undertaking’s efforts on green procurement and possibly other expenditures,” the proposal notes.
The supervisor also identifies challenges in the Taxonomy Regulation’s current approach to financial conglomerates – “notably the insufficient relevance and potential methodological errors of aggregated KPIs”.
It proposes a new approach, through which the primary reporting regime is determined at group level, and then topped up by additional disclosures if necessary.
EIOPA’s draft proposals focus on changes to insurance corporate disclosures under the Taxonomy Regulation, with a view to making them more aligned with other sustainable finance frameworks and financial institutions.
The consultations will run for six weeks, until 12 August, with a view to presenting final advice to the Commission by the end of October.
ESMA will hold a public hearing to present the proposals and engage with stakeholders on 22 July.
