The European Securities and Markets Authority (ESMA) published on 29 October its final report with technical advice to the European Commission on simplifying the key performance indicators of the Taxonomy Disclosures Delegated Act. It recommends narrowing the mandatory operating expenditure (OpEx) indicator to non-capitalised research and development spending. It also proposes simpler group-level reporting, removing the weighted-average indicator, and targeted measures to make disclosures more proportionate and easier to understand. The report has been sent to the Commission for its review of the act.

What it means: The EU Taxonomy is the system that classifies which economic activities count as environmentally sustainable, and large companies must report what share of their turnover, investment and operating spending falls into those activities. The operating expenditure indicator has proved the hardest in practice, because it required companies to separate maintenance, repair and lease costs using criteria many of them could not apply consistently. If the Commission accepts the proposal, the burden will fall significantly for listed companies and groups that publish sustainability reports, and the figures will focus on information that investors and banks actually use. Removing the weighted indicator at group level matters especially for groups with banking or insurance subsidiaries. For Greek listed companies and their advisers, this is a proposal rather than a rule in force, so current obligations remain until the act changes. The move is part of the wider push to simplify European sustainability reporting rules. Companies designing data collection systems for coming financial years need to follow the Commission's final decision before investing in new processes.

Read the original on ESMA

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