Date: 3rd May 2023
Author: BETTER FINANCE

BETTER FINANCE welcomes the amendments to the Taxonomy Disclosures Delegated Act (Art 8) in providing consistent methodologies and economic performance indicators that ensure financial and non-financial undertakings disclose the relevant taxonomy eligibility and alignment information. In order to strengthen market transparency and 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 KPIs are instrumental in enabling market participants to measure and report the taxonomy alignment and environmental sustainability of their activities as well as providing robust transparency and allowing for well-informed investment decisions.

However, the Commission should provide further help and guidance in interpreting the reported KPIs to ensure maximum clarity for non-professional retail investors and end-users. There is evidence that the EU individual investors feel overwhelmed by the sheer complexity of, and uncertainty associated with, the investment products available. The information on distributors websites is not really transparent and not at all standardised across products and countries and it is difficult for individual investors who are not financially savvy to find, understand and compare this information in order to make an informed investment decision and choose a suitable product.

BETTER FINANCE has stated previously its support that the KPI should be calculated by establishing the weighted average taxonomy-aligned activity contribution of investments in the numerator and using all investments as the denominator. It is particular important to consider as denominator the entire sample of investments in order to provide a comprehensive overview of taxonomy aligned investments. BETTER FINANCE in its research on sustainable investment funds and related ESG rating, has noticed that not always sustainability factoring is screened for the 100% of the portfolio. Sustainability screening might apply only to a part of the portfolio thus allowing non-sustainable investment in a fund marked as sustainable.