ESG: ESMA CP on technical advice to simplify taxonomy disclosures

On 1 July 2026, ESMA published a consultation paper (CP) on technical advice on selected KPIs as part of the European Commission’s review of the Disclosures Delegated Act (the Act) under the Taxonomy Regulation.

The CP builds on the Commission’s Omnibus package and focuses on simplifying the reporting framework under the Taxonomy Regulation while maintaining the relevance of disclosures for investors.

The consultation period will run until 12 August 2026 and ESMA will deliver its final technical advice to the Commission by end-October 2026. 

The Commission intends to complete its review of the Act by Q1 2027 and for the new measures to enter into force in  Q3 2027.

(Note that the Commission asked each ESA to provide advice on targeted aspects of the review the Taxonomy disclosure framework. All three consultations were published on 1 July 2026 - the EBA’s can be found  here and EIOPA’s here.)  

In the CP, ESMA:

• proposes several simplifications to the Taxonomy disclosure framework for non-financial undertakings and asset managers, including the operational expenditure key performance indicator (OpEX), addressing stakeholder concerns about complexity and reporting burden
• seeks feedback on a possible solution for group-level reporting in mixed groups, based on the parent undertaking’s reporting model.

What does the CP cover?

In the CP, ESMA seeks stakeholders’ views on the following four issues

1. Revising the OpEx KPI

The CP looks at the current limitations of the OpEx KPI, including that some users of sustainability information feel that its current configuration is of limited relevance, with financial undertakings and other investors generally noting that they do not rely on this KPI as a meaningful metric.

ESMA considered four options

• refining the current OpEx through limited adjustments
• broadening OpEx to all operating costs
• focusing OpEx on ‘green procurement’
• focusing OpEx on R&D, with an optional additional KPI (‘OpEx+’)

Of these, its preferred approach is the final option, which it believes would simplify the existing OpEx formula to derive a mandatory OpEx KPI focused only on one cost item, namely R&D expenditure.

Voluntary additions to the ratio could be reported separately (as an opt-in regime) as ‘OpEx+’, including additional items (in particular, ‘green procurement’) critical to the greening of an undertaking’s operations.

In ESMA’s view, this approach would both

• retain critical elements of the current OpEx KPI without triggering unnecessary complexity whilst ensuring that the KPI has a clear purpose and
• allow undertakings flexibility (through a voluntary OpEx+ ratio) to include other operating expenditures that they think are particularly material to their business model.

2. Voluntary use of OpEx by financial undertakings

The CP seeks feedback on the voluntary use of the OpEx KPI, particularly for Taxonomy disclosures by asset managers.

Preliminary analysis indicates that the usefulness of OpEx for financial undertakings depends on how the KPI is revised and its voluntary reporting may increase complexity while providing only marginal additional information value.

ESMA notes both that, currently, the Act does not explicitly envisage the use of the OpEx KPI disclosed by non-financial undertakings into the Taxonomy disclosures of financial undertakings and that the ESAs have looked into whether the voluntary use of OpEx in financial undertakings’ disclosures could increase the usability of the Taxonomy regime and the relevance of the OpEx KPI.

In light of this work, the ESAs have considered a possible methodology to include the OpEx KPI into the respective financial undertakings’ taxonomy disclosure requirements, combining the OpEx KPI with the CapEx KPI through a weighted-average methodology – a methodology which the CP admits has both benefits and drawbacks, not least since voluntary inclusion of OpEx financing in the KPIs of financial undertakings might increase room for greenwashing.

ESMA is, therefore, consulting on the proposal for changes to the OpEx KPI of non-financial undertakings to make the use of underlying OpEx numbers desirable, in combination with the CapEx numbers, also for asset managers. Such use could be optional.

3. Group Taxonomy reporting

The Act defines separate reporting regimes (KPIs, templates and complementary information) for non-financial undertakings and for three main types of financial undertakings, namely credit institutions, asset managers and insurance and reinsurance undertakings.

However, other than the reporting regime for credit institutions, the Act does not address where two or more of these types of undertakings co-exist within the same group.

When it comes to reporting disaggregated information of individual groups’ subsidiaries or groups of subsidiaries, the requirement in the Commission Notice of 8 November 2024 (the Notice) to prepare multiple templates is regarded by stakeholders as burdensome and costly, resulting in many pages of templates that could obscure material information.

In respect of group reporting at a horizontal level (i.e., of relevance to each of the ESAs), the ESAs’ draft advice is that

• in general, a group should disclose the KPI(s) relevant for the type of activity of the parent undertaking, following the rules set out in the Act.
• additional relevant KPIs should be disclosed by material subsidiaries or intermediate parent undertakings, where the businesses undertaken by these entities are of a different nature than those carried out by the parent undertaking, necessitating the use of different KPIs.
• no, or limited disclosure of, additional KPIs by material subsidiaries or intermediate parent undertakings may be justified where the businesses of these entities are sufficiently integrated within the group reporting at consolidated level.
• where the other business activities exclusively serve the group’s internal needs (such as captive (re)insurance undertakings), there may be limited additional value in reporting on the Taxonomy profile of these activities which would be, at least, highly correlated with the group’s Taxonomy profile as reflected through the main group reporting regime.

The ESAs also felt that

• the additional information based on relevant KPIs provided by material subsidiaries and parent undertakings could be simplified as compared to the full templates. They offer their assistance to the Commission in developing simplified templates for this purpose
• the requirement in the Notice to compute a weighted KPI aggregating various activities carried out by groups is not meaningful and has shortcomings. The ESAs invite the Commission to consider deleting this point.

For non-financial-undertaking-led groups, ESMA’s preferred approach would be for the Act to

• set the main group regime as corresponding to the Taxonomy disclosures applicable to non-financial undertakings and
• require additional information in relation to the other businesses of the group so that there is no material loss of information.
  This could include provisions that
  • separate, or complementary, taxonomy disclosures would not be required for group subsidiaries which carry out other businesses and whose aggregated consolidated revenue is below 10% of the total group turnover
  • when such other businesses (and, in particular, financial services within a non-financial group) consist of activities which can be mapped to sustainable activities foreseen by the Taxonomy Regulation, the main reporting regime would capture these without the need for additional separate disclosures
  • when the activities of the other businesses (carried out by subsidiaries above the materiality threshold) cannot be mapped to sustainable activities as envisaged by the Taxonomy Regulation (and so would not be captured by the main reporting regime), complementary disclosures should be provided, giving information on the materiality and nature of such businesses.

4. Additional possible simplifications

As requested by the CTA, ESMA also looked at – and is consulting on - additional measures which could help reduce reporting burden while enhancing its usefulness.

These include:

• greater connectivity with the European Sustainability Reporting Standards framework
• phasing-in the application of new requirements
• clarifying the interaction with IFRS concepts (in particular, IFRS 8)
• simplifying reporting obligations of non-financial undertakings in relation to Annex I of the Act, the templates and contextual disclosures and
• targeted improvements to reporting by asset managers.

Background to the CP

On 26 February 2025, to accompany its Omnibus simplification package, the Commission published a legislative proposal to amend the Disclosures Delegated Act. The aim was to make certain requirements more flexible and to reduce the amount of data to be provided.

On 4 March 2026, the Commission sent a Call for Technical Advice (CTA), asking each of the three European Supervisory Authorities (ESAs) to separately review and propose ways to simplify taxonomy reporting under the Disclosures Delegated Act by concentrating on measures that were not addressed in the Omnibus Delegated Act.

For our summary of the CTA, see here.

The CTA invited ESMA to provide technical input on

• broadening the scope of the OpEx KPI denominator
• referencing existing accounting standards for OpEx KPI and
• increasing flexibility in the reporting of the OpEx.

ESMA was also asked to propose other targeted simplifications and improvements, where it felt these were necessary - for example, simplifying the reporting templates and related contextual information or proposing other changes to KPIs for non-financial undertakings and/or asset managers.