EU Taxonomy Regulation Financial KPIs and Green Asset Ratio (GAR) FAQ

Article 8 of Regulation (EU) 2020/852 requires undertakings that must publish non-financial information under Articles 19a or 29a of Directive 2013/34/EU to disclose how and to what extent their activities are associated with environmentally sustainable economic activities. Article 8 names turnover, CapEx, and OpEx for non-financial undertakings, then requires a delegated act to specify the content, presentation, and methodology, including the specificities of financial undertakings.

The Disclosures Delegated Act explains why the non-financial turnover, capital expenditure, and operating expenditure KPIs are not appropriate for lending, investment, and insurance activities. It therefore sets separate KPI frameworks for asset managers, credit institutions, investment firms, and insurance and reinsurance undertakings.

For credit institutions subject to Articles 19a and 29a of Directive 2013/34/EU, the Disclosures Delegated Act identifies the Green Asset Ratio as the main KPI. It shows the proportion of covered on-balance-sheet exposures related to Taxonomy-aligned activities compared with the covered assets in the applicable denominator.

The delegated act links the GAR to the institution's main lending and investment business, including loans, advances, debt securities, and equity holdings. For credit exposures to financial undertakings, the numerator is based on counterparties' KPIs calculated under the same delegated regulation; for credit institutions as counterparties, that means using the counterparty's total GAR.

The Disclosures Delegated Act phased in reporting. Non-financial undertaking KPIs applied from 1 January 2023, while financial undertaking KPIs applied from 1 January 2024. Regulation (EU) 2026/73 later deferred credit institution KPIs for the trading book and for commission and fee income from commercial services and activities other than financing to 1 January 2028.

For a financial year beginning in 2025, an undertaking may use either the amended rules or the rules applicable on 31 December 2025. Commission Notice C/2026/2558 explains that an undertaking choosing the earlier rules must apply that rule set in full and identify the rule set in its contextual information; it should not combine selected parts of the two versions.

Regulation (EU) 2026/73 also changes the denominator. Derivatives, cash and cash equivalents, on-demand interbank loans, goodwill, commodities, and other asset categories outside Article 7(6) are excluded from financial-undertaking KPI denominators. Exposures to undertakings outside Articles 19a and 29a reporting are generally excluded from both numerator and denominator, subject to the act's rules for voluntarily reported counterparty KPIs and known use-of-proceeds financing. Central governments, central banks, and supranational issuers remain excluded from numerator and denominator.

The 2026 act adds KPI-specific 10% non-materiality options. For the credit institution GAR, on-balance-sheet assets with known use of proceeds may be left unassessed where their cumulative value is below 10% of all such assets included in the GAR denominator; they must be reported separately as non-material. Until 31 December 2027, a financial undertaking that makes no Taxonomy association claim can instead use the prescribed management-report statement route, subject to Article 7(9).

The financial undertaking KPI number is not enough on its own. Annex XI requires qualitative disclosures to support the quantitative KPIs and market understanding of them.

Useful evidence should therefore explain what assets and activities the KPI covers, which data sources were used, what limitations exist, how Taxonomy-aligned economic activities evolved over time from the second year of implementation, and how the undertaking treats Taxonomy compliance in business strategy, product design, and engagement with clients and counterparties.