Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets (second Commission Notice)

The EU Commission has published a new Notice on the „interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets“ in the Official Journal (OJ) of the EU. The purpose of this notice is to provide further interpretative and implementation guidance – in form of FAQs – to non-financial entities as to their Key Performance Indicators (KPIs) related reporting obligations under the Disclosures Delegated Act (Commission Delegated Regulation (EU) 2021/2178) supplementing the EU Taxonomy Regulation (Regulation (EU) 2020/852). It shall be noted that the Commission emphasizes that the FAQs do not alter the existing legal rights and obligations, but are merely meant to assist market participants in implementing the noted regulations and requirements. As the number of FAQs is quite large, we limit our publication to the questions posed in the document. For the answers, please refer to the original legal notice.
The following questions are enclosed in the document:
#### SECTION I – GENERAL FAQs
1. What is the envisioned timeline for the application of Taxonomy-related disclosures set out in the Complementary Delegated Act (CDA)?
2. What is the envisioned approach for Taxonomy-related reporting in relation to the environmental objectives?
3. What is the impact of the CSRD on the scope of the reporting entities under the Disclosures Delegated Act?
4. When and how should the Taxonomy disclosures be verified by external reviewers? How will this change with the application of CSRD?
5. Are undertakings established in EEA-countries obliged to report the Taxonomy-alignment of their economic activities?
6. How can entities ensure that their voluntary reporting of Taxonomy-alignment of their economic activities does not contradict or misrepresent mandatory disclosures set out in the Disclosures Delegated Act?
7. How are reporting undertakings expected to disclose comparative information in the disclosures under the Disclosures Delegated Act?
8. How should reporting undertakings address ‘double-counting’ in the context of business activities contributing to multiple environmental objectives?
– Contribution to climate change mitigation (CCM) and climate change adaptation (CCA)
– For activities contributing substantially to CCM, treatment of CapEx to meet DNSH criteria for non-climate environmental objectives
– Treatment of an activity making substantial contribution to multiple environmental objectives (other than only to CCM and CCA)
9. What should be the level of consolidation of KPIs of a parent undertaking with respect to (i) their third country subsidiaries and (ii) their activities/assets in third countries, or those of their EU subsidiaries? Where should KPIs be disclosed?
10. What is the level of consolidation of KPIs of non-EU groups with a NFRD subsidiary in the EU?
11. Can a subsidiary falling within scope of the NFRD/CSRD be exempted from making Taxonomy related disclosures if its parent undertaking discloses Taxonomy-related information at consolidated level where required or on a voluntary basis?
12. Where a reporting undertaking is required to provide consolidated KPIs, should it also provide KPIs of its subsidiaries?
13. Is there any minimum turnover, CapEx and OpEx threshold below which undertakings are not obliged to report Taxonomy-eligibility or alignment of their economic activities (‘materiality thresholds’)?
14. How should turnover, CapEx, OpEx of joint ventures be treated for the reporting of Taxonomy-related KPIs?
15. How should reporting undertakings account for hedging instruments (including forward sales of power)?
16. How should the KPIs be adjusted by non-financial undertakings to take account of the environmentally sustainable bonds that they issued with the view of avoiding ‘double-counting’? How should environmentally sustainable bonds / debt securities and the linked double counting issues be treated?
17. How should a reporting undertaking treat the turnover and CapEx from disposal groups and discontinued operations and in the context of IFRS 5?
18. How should reporting undertakings assess the Taxonomy-eligibility of economic activities for climate change adaptation (CCA) under Article 11(1)(a) of the Taxonomy Regulation?
19. What is the Taxonomy-aligned share of turnover and corresponding CapEx/OpEx from activities listed in Annex II to the Climate Delegated Act? 17
#### SECTION II – FAQs ON TURNOVER KPI
20. When should an undertaking be required to report under the Disclosures Delegated Act an economic activity that has not been performed by the reporting entity itself but by a subcontractor?
21. How should reporting undertakings disclose turnover from Taxonomy-aligned economic activities whose output is used or consumed internally?
22. How should reporting undertakings allocate the turnover to economic activities which provide multiple services or products to customers?
#### SECTION III – FAQs ON CAPEX KPI
23. How should reporting undertakings treat public funding and subsidies received to finance their CapEx?
24. At what point in time does the five to ten year-period of the CapEx plan commence for non-financial undertakings for the purposes of reporting? Does this time period apply both to a plan to expand a Taxonomy-aligned economic activity as well as to upgrade a Taxonomy-eligible economic activity into a Taxonomy-aligned economic activity?
25. What is the beginning of the 18 month-period for the completion of individual measures referred to in point (c) of the first paragraph of Section 1.1.2.2 of Annex I?
26. How comprehensive and precise should a CapEx plan be to be counted in the numerator of the CapEx KPI? Would the expansion of an existing Taxonomy-aligned economic activity in the same facility count as CapEx under point (a) or (b) of the first paragraph of Section 1.1.2.2. of Annex I?
27. How should the Taxonomy-aligned value of CapEx be presented on points (a), (b) and (c) of the first paragraph of Section 1.1.2.2 of Annex I?
28. What is the scope of the CapEx and OpEx referred to in points (c) of the first paragraph of Section 1.1.2.2 and of Section 1.1.3.2 of Annex I, i.e. purchase of Taxonomy-aligned output and individual measures?
29. How should CapEx and OpEx integrated in value chains be disclosed in the situation where the reporting undertaking is performing both the upstream and the downstream Taxonomy-eligible economic activity?
30. How should CapEx be assessed with regard to Taxonomy-alignment if the asset that the CapEx is financing might be used for various projects?
31. Can prepayments be counted as part of Taxonomy-aligned CapEx?
#### SECTION IV – FAQs ON OPEX KPI
32. How should research and development be accounted in the numerator of the OpEX KPI where it cannot be linked to specific activities?
33. How should OpEx categories referred to in points (a) to (c) the first paragraph of Section 1.1.3.2. of Annex I (OpEx Numerator) be understood and treated in the numerator and denominator of the OpEx KPI?
34. To which elements of the definition of the denominator of OpEx KPI does the notion of ‘maintenance and repair, and any other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment’ refer under Section 1.1.3.1 of Annex I?