The Swiss Finance Council (SFC) welcomes the opportunity to provide feedback on the draft Delegated Act under Article 8 of the Taxonomy Regulation (hereafter the “DA”) and commends the European Commission’s active commitment to make the European Union climate-neutral by 2050. In this feedback, we would like to highlight the SFC’s key concerns identified in relation to the proposed DA.
Firstly, we would like to note that the phased implementation approach provided by the DA does not solve the significant challenge that financial institutions face in collecting EU Taxonomy data from their non-financial counterparts which are not subject to non-financial disclosure obligations themselves (i.e. not subject to the EU Non-Financial Reporting Directive – NFRD). The phased-in period, as currently designed by the Commission, equally applies to non-financial companies which are required to report complete KPIs only in 2023. To address this issue, we urge the Commission to establish a sensible sequence of disclosure requirements, whereby non-financial undertakings are required to disclose the complete KPIs one year earlier than financial institutions.
Secondly, we are concerned about the draft DA’s approach to include exposures to market actors that are not covered by the NFRD (future CSRD), in particular SMEs and non-EU companies, in the denominator but not in the numerator of the KPIs for financial institutions. As noted by the EBA in its advice to the Commission, KPIs should be defined consistently, meaning that if certain activities are excluded from the numerator, they should be excluded also from the denominator. But the approach provided by the DA will lead to a lack of comparability between different institutions’ KPIs and the distortion will be particularly evident for financial institutions headquartered outside the EU due to the natural home bias that exists in their lending books. Therefore, we recommend including in both numerator and denominator only exposures to activities for which data can be sourced, i.e. only exposures to companies subject to the NFRD (future CSRD) obligations.
Thirdly, we have concerns regarding the impact that the EU Taxonomy Article 8 reporting requirements may have on both financial sector and real economy companies in jurisdictions outside the EU, where the EU Taxonomy definitions are not legislated. In particular, financial institutions headquartered outside the EU that will fall within the scope of the future CSRD will be subject – unless clarified otherwise – to the disclosure obligations under the EU Taxonomy Regulation Article 8 for their entire portfolio. Moreover, non-EU financial institutions subject to the EU Taxonomy disclosure obligations will face significant challenges in collecting EU Taxonomy data from their clients/investees as a large part of non-EU companies will not have legal obligations to generate and disclose EU Taxonomy-relevant information. For these reasons, we reiterate our recommendation to include in both numerator and denominator only exposures to activities from which data can be sourced reliably, meaning only exposures to companies subject to the NFRD (future CSRD) obligations. This will not only ensure consistency and comparability of the KPIs as explained above, but would also limit unintended extra-territorial impacts of the EU Taxonomy Regulation.
Lastly, we would like to point out that Annex V of the DA refers exclusively to IFRS’ accounting terminology, which could be problematic for non-EU financial institutions preparing financial statements according to the US GAAP (considered as equivalent to IFRS by the Commission). We would appreciate if the Commission could clarify that non-EU companies will be able to use US GAAP’s classifications as it would be disproportionate to require non-EU companies to prepare financial statements under EU IFRS for the purpose of this DA.
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