ESG: ESMA provides advice on simplifying Taxonomy Regulation KPIs

On 29 October 2026, ESMA published a Final Report. This set out technical advice to the European Commission on selected Key Performance Indicators (KPIs) under the Disclosures Delegated Act (the DDA), which supplements the Taxonomy Regulation.

What’s the background?

In March 2026, the Commission sent a Call for Advice (CfA), mandating the three European Supervisory Authorities (ESAs) to complete the review and simplification of taxonomy reporting under the DDA, concentrating on measures that had not been addressed in the ‘quick fix’ Omnibus Delegated Act.

For our summary of the CfA, see here.

In light of the CfA, ESMA held a public consultation between 1 July and 12 August 2026 – this focussed on

• revisions to the Operational Expenses (OpEx) KPI
• the voluntary use of OpEx by financial undertakings and
• Group Taxonomy reporting

ESMA also sought views on proposals for other targeted simplifications and improvements.

For our summary of the ESMA consultation paper, see here.

What does the Final Report say?

The Final Report contains the following recommendations to the Commission

(a) Revising the OpEx KPI

ESMA’s recommendations include

• revising the mandatory OpEx KPI so that it focuses on non-capitalised R&D expenditure, without affecting the existing materiality reliefs
• retaining a broader (but simplified) notion of OpEx, which encompasses specified expenditure categories, for determining eligible use-of-proceeds expenditure under the EU Green Bond Regulation and
• monitoring the revised KPI framework for a period of five years.

ESMA does not, though, recommend introducing prescribed requirements for a voluntary ‘OpEx+’ KPI. Instead, ESMA considers that the status of any voluntary Taxonomy-related disclosure should be clarified with appropriate safeguards applying in relation to reconciliation, transparency, comparability and greenwashing risks.

(b) The voluntary use of OpEx by financial undertakings

Respondents to ESMA’s consultation paper generally opposed the idea of permitting asset managers to combine counterparties’ OpEx and Capital Expenditure (CapEx). In light of this, the ESAs do not recommend introducing the voluntary use of the OpEx KPI in the Taxonomy disclosures of financial undertakings, particularly those of asset managers.

(c) Group Taxonomy reporting

The ESAs recommend the removal of the requirement to calculate a weighted-average KPI - the main reporting regime would be determined primarily by reference to the parent undertaking’s nature. This would be subject to a specific rule for financial conglomerates and to the application of the non-financial undertaking regime to other financial holdings.

In addition, the ESAs feel that simplified disclosures should be required for secondary businesses of a different nature in order to avoid the loss of material information.

ESMA’s specific considerations on this matter include the possibility of relying on a cumulative materiality threshold of 10% to determine when secondary business disclosures can be omitted.

These disclosures

• could also be omitted when those businesses are already adequately captured by the main reporting regime or exclusively serve intragroup needs and
• should be permitted at consolidated secondary business level, with flexibility to provide more relevant disaggregation, for example at subsidiary level.

For non-financial secondary businesses, ESMA’s recommendation is that the required information should be limited to headline Turnover and CapEx eligibility and alignment KPIs, accompanied by concise contextual information.

(d) Additional possible simplifications

The Final Report makes a number of suggestions which ESMA recommends should be included in the rules.

These include, among other things

• introducing optional reliefs in relation to acquisitions, disposals, omitted information and comparative information
• permitting cross references to ESRS disclosures
• providing for a one-year phased application of amendments
• allowing eligibility-only reporting for newly introduced activities and first-time reporters during the first financial year
• clarifying that IFRS 8 should serve as contextual information and a consistency check, rather than as a determinative factor in Taxonomy materiality assessments
• retaining the reporting requirements for enabling and transitional activities pending completion of the SFDR review
• incorporating the clarification in existing Commission FAQs (notably FAQ 5) on adaptation related activities into the relevant delegated acts
• retaining mandatory CapEx Type C reporting while drawing the Commission’s attention to the need for further clarification
• removing the adjusted Turnover KPI for sustainable bonds
• making the disclosure of turnover from internal sales voluntary
• introducing a materiality filter for contextual information
• establishing a closed list of quantitative and qualitative contextual datapoints for future digital tagging
• enhancing the accessibility and governance of Taxonomy FAQs and
• refraining from further amendments to the asset-management annex at this stage.

Next steps

The Commission will consider the input from the ESAs – it intends to complete its review of the Disclosures Delegated Act by Q1 2027 and for any new measures to enter into force in Q3 2027.