EU Taxonomy GAR and financial undertaking KPIs

The Disclosures Delegated Act defines a financial undertaking as an undertaking subject to the Article 19a or 29a Accounting Directive sustainability reporting obligations that is an asset manager, credit institution, investment firm, insurance undertaking, or reinsurance undertaking.

That distinction matters because Article 8(2) of the Taxonomy Regulation names turnover, CapEx, and OpEx KPIs for non-financial undertakings, while the delegated act provides separate KPIs and calculation methodologies for financial undertakings. A bank, asset manager, investment firm, insurer, or reinsurer should therefore start by identifying the applicable undertaking type before choosing a template or KPI formula.

The delegated act describes the GAR as the main KPI for credit institutions. It shows the proportion of exposures related to Taxonomy-aligned activities compared with the credit institution's covered assets, reflecting lending and investment business such as loans, advances, debt securities, and equity holdings.

For on-balance-sheet exposures, Annex V says the GAR covers specified accounting categories of financial assets, including loans and advances, debt securities, equity holdings, investments in subsidiaries, joint ventures and associates, certain non-trading fair-value assets, and repossessed real estate collateral. The GAR is disclosed with stock and flow information, environmental-objective breakdowns, and relevant enabling or transitional activity breakdowns.

Financial undertaking KPI calculations depend heavily on counterparty and investee disclosures. Commission draft guidance says financial undertakings should compute and disclose two separate KPI sets when exposures with unknown use of proceeds are weighted by issuer or counterparty Taxonomy KPIs: one based on turnover KPIs and one based on CapEx KPIs.

For known-use-of-proceeds exposures that finance specific identified Taxonomy-aligned activities, the draft guidance says those exposures enter both numerator sets to the extent they finance Taxonomy-aligned activities, without further weighting by the issuer or counterparty KPI. For unknown-use-of-proceeds exposures, the turnover-based KPI uses turnover KPI weighting and the CapEx-based KPI uses CapEx KPI weighting.

The delegated act has explicit exclusions that affect how visitors should read GAR and other financial undertaking KPIs. Article 7 excludes exposures to central governments, central banks, and supranational issuers from both the numerator and denominator of financial undertaking KPIs. It also excludes derivatives from the numerator and excludes exposures to undertakings that are not obliged to publish non-financial information under Articles 19a or 29a from the numerator.

For credit institutions, Annex V adds GAR-specific exclusions: Article 7(1) exposures are outside GAR coverage, and financial assets held for trading, on-demand interbank loans, and exposures to undertakings not obliged to publish non-financial information are excluded from the GAR numerator. The draft Commission financial-undertaking notice warns that, because of current coverage limits, financial undertaking KPIs cannot currently reflect all financing of Taxonomy-aligned economic activities.

The Article 8 transition matters because financial undertaking KPI data depends on information from counterparties and investees. The delegated act limited 2022 reporting to specified elements and qualitative information, with remaining provisions applying from 1 January 2023 for non-financial undertakings and from 1 January 2024 for financial undertakings.

Credit institutions have an additional staged item: the delegated act says KPIs related to their trading book and commission and fees for commercial services and activities other than financing should apply from 1 January 2026. The Commission's 2023 draft notice also states that financial undertakings start reporting their KPIs, including GAR, as of 1 January 2024 and expects robustness and accuracy to improve as Taxonomy data flows increase.

Annex XI requires quantitative KPIs to be accompanied by qualitative information for asset managers, credit institutions, investment firms, and insurance or reinsurance undertakings. That qualitative layer is not optional page decoration; it explains scope, data sources, data limitations, changes over time, strategy links, product design, and engagement with clients and counterparties.

A useful evidence file for GAR or other financial undertaking KPIs should therefore connect each number to its source population, exclusions, counterparty KPI inputs, known-use-of-proceeds evidence, methodology choice, and approval trail. Without that record, users cannot tell whether a ratio changed because financed activities changed, the counterparty data set improved, or the methodology or coverage changed.