04 December 2020

EFAMA reply to ESMA's CP on the draft advice to EU Commission under Article 8 of the Taxonomy Regulation

EFAMA strongly supports the development and implementation of the Taxonomy Regulation. We believe that reporting on the level of alignment with the Taxonomy by non-financial and financial undertakings is essential to strengthening market integrity around sustainability issues.

While we believe ESMA´s draft advice on Article 8 of the Taxonomy provides very strong foundations for successfully implementing the disclosure requirements, we would like to make the following recommendations on (i) implementation timelines, (ii) companies and (iii) asset managers´ reporting.

Sequencing of disclosures by non-financial undertakings and asset managers

We highlight that without data from non-financial undertakings, it will be very difficult for asset managers to meet their reporting obligations. Asset managers´ obligations to report on the KPIs in Article 8 of the Taxonomy and/or Article 5 and 6 of the Taxonomy will apply from 1st January 2022. However, such reporting would be meaningless unless there is underlying Taxonomy reporting by companies widely available in early 2022. Our understanding is that such company level reporting will only be available in the course of financial year 2022.

Therefore, we urge ESMA to seek for a solution to this problem in collaboration with other ESAs. Especially regarding the Taxonomy-related disclosures at the product level, we would suggest a coordinated phasing-in solution that would involve the following stages:
- As of 1 January 2022, disclosure of the planned proportion of Taxonomy-compliant investments, if such investments are part of a product’s investment strategy, in the pre-contractual document,
- One year later, as of 1 January 2023, reporting on the actual Taxonomy-related KPIs at the product level calculated on the basis of issuer reports to be published in 2022.
This approach would ensure that reporting of Taxonomy-relevant KPIs is based from the outset to a large extent on reliable information from issuers. If this timeline inconsistency is not addressed, asset managers will have to rely on inherently inaccurate estimations on Taxonomy alignment due to the lack of data. To protect the integrity of the ESG market from the onset, this situation should be avoided....

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