EU Taxonomy Regulation GAR KPI Workflow

Start with the legal reporting perimeter. Article 8 of Regulation (EU) 2020/852 requires in-scope undertakings to disclose how and to what extent their activities are associated with environmentally sustainable economic activities. For credit institutions, the Disclosures Delegated Act specifies the GAR methodology in Annex V and the tabular presentation in Annex VI.

The GAR is not a generic ESG score. The delegated act describes it as the proportion of a credit institution's assets financing and invested in Taxonomy-aligned economic activities as a proportion of total covered assets. The workflow should therefore begin by identifying the credit institution, consolidation basis, reporting year, Annex VI templates in scope, and the Article 10 timing rules that apply.

Build the exposure inventory around Annex V categories rather than around a generic loan list. The GAR calculation covers on-balance sheet financial assets such as loans and advances, debt securities, equity holdings, and repossessed collateral, while Article 7 exclusions affect whether exposures sit outside the GAR denominator, outside the numerator, or outside both.

For exposures to undertakings, the workflow should capture whether the counterparty publishes Article 8 KPIs and which KPI must be applied. For non-financial undertakings, the delegated act uses their turnover and CapEx Taxonomy KPIs in several weighting steps. For financial undertaking counterparties, the bank should use the relevant counterparty KPI under the delegated act, such as a counterparty credit institution's total GAR.

A robust GAR workflow keeps two evidence paths distinct. Where use of proceeds is known, the evidence package should connect the exposure amount to the financed Taxonomy-aligned activity and the relevant technical screening criteria. Where use of proceeds is not known, the workflow should apply the issuer or counterparty KPI weighting required by Annex V rather than treating the full exposure as aligned.

The Annex VI guidance also makes the 'of which Use of Proceeds' column a separate information view. It is used for exposures where proceeds are known and included in the GAR up to the amount financing Taxonomy-aligned activities; it does not simply add together with the 'of which transitional' and 'of which enabling' views.

The calculation workstream should produce stock and flow outputs that can be traced back to gross carrying amounts and Annex VI rows. For flow in template 4, the draft Commission notice explains that credit institutions should use newly incurred exposures during the year prior to the disclosure reference date and should not calculate flow as the difference between exposure at T and exposure at T-1.

Before publication, the review pack should include the quantitative templates and the qualitative information required by Annex XI. That support should explain the scope of assets and activities, data sources and limitations, evolution of Taxonomy-aligned economic activities, and how Taxonomy compliance is reflected in business strategy, product design, and client or counterparty engagement.