Data availability and quality pose major challenges for meaningful sustainability reporting. One important step to achieve the necessary transparency and resolve data quality issues is having a clear and unambiguous definition of environmentally sustainable activities, as done by the EU Taxonomy. Thus, the introduction of key performance indicators (KPIs) is another major step to foster sustainability reporting and facilitate the usage of disclosed information. The EU Taxonomy Regulation already called for the inclusion of KPIs in the non-financial statement:
“Any undertaking which is subject to an obligation to publish non-financial information […] shall include in its non-financial statement […] information on how and to what extent the undertaking’s activities are associated with economic activities that qualify as environmentally sustainable”
Alongside the renewed sustainable finance strategy and a proposal for EU Green Bond Standards , the European Commission adopted on 6 July 2021 a delegated act supplementing the Taxonomy Regulation, with respect to the information to be disclosed by sustainability KPIs as well as their underlying methodology. The implementation of this delegated act will enhance the comparability of KPIs across different economic activities while increasing the robustness of ESG data. Even though KPIs are not able to provide a holistic overview on the sustainability matters of a firm, they play a central role in understanding the trajectory of companies toward more sustainability.
In this article, we summarize the delegated act detailing the methodology for calculating the KPIs that must be disclosed by both non-financial and financial companies. For the latter, the regulation foresees different approaches for credit institutions, asset managers, investment firms and insurance companies.