Response to discussion on Technical Advice on selected KPIs under the Taxonomy Disclosures Delegated Act under Article 8 of the Taxonomy Regulation

Q1. Please identify your organisation (if applicable) and indicate the capacity in which you are responding to this consultation:

Other (please specify)

Q13. Do you agree with the analysis presented and proposed conclusions?

MSCI agrees with the EBA's analysis, and in particular with the observation that a weighted KPI can overstate group alignment in credit-institution-led financial conglomerates by capturing the same insurance or non-financial activities twice: once through the equity method within the scope of prudential consolidation, and again through the turnover those activities generate in the weighted KPI. This double-counting risk reinforces our broader support for moving away from weighted averaging at group level.

i. Should the KPI disclosed by the parent undertaking, reflecting the group’s main or prevalent activity, be used? If not, what alternative methodology should be applied?

MSCI supports using the parent's main-activity KPI rather than a weighted average where a single figure is required. Our own FY2024 analysis of around 30 mixed groups shows that, for the large majority, the difference between a main-activity KPI and a revenue-weighted average is only a fraction of a percentage point; the exceptions are a small number of groups with a small but highly-aligned non-financial business, where a blended figure can obscure, rather than clarify, where alignment actually sits. Against this limited informational benefit, weighted averaging imposes a disproportionate cost, since issuers generally publish only re-weighted top-line figures rather than a full weighted breakdown, requiring a data provider to recalculate the underlying figures itself. 

ii. In the case of a credit institution-led group, such as a financial conglomerate, should the consolidated KPI disclosed by the parent undertaking also incorporate the assets of the insurance (and non-financial) undertaking, rather than accounting for the insurance (and non-financial) undertaking solely through the equity method? Please justify your answer in terms of feasibility, usability and transparency of sustainability information.

On the consolidation question, incorporating the underlying insurance or non-financial activities directly, rather than via the equity method, would avoid the double-counting we describe in our response to Q13.

Q16. Do you agree with the analysis presented and the conclusion that OpEx financing should not be explicitly incorporated in the methodology for calculating financial undertakings’ KPIs? Please provide your rationale for supporting the explicit inclusion of provisions allowing financial undertakings, on a voluntary basis, to use the OpEx KPI disclosed by their counterparties when calculating their own KPIs.

MSCI agrees with, and supports, the EBA's preliminary conclusion that OpEx should not be built into financial undertakings' KPI methodology as a mandatory element. In our view, even voluntary use creates a comparability problem, since some financial undertakings would apply it and others would not. Taxonomy-aligned OpEx is typically small relative to the capital base that drives alignment ratios. It also combines two conceptually different quantities, capitalised multi-year expenditure and current-period running costs, into a single ratio, which we believe makes the resulting figure harder for users to interpret.

Q19. Do you have any additional comments or suggestions to improve, simplify or clarify the disclosure requirements within the scope of this Call for Advice, including through redrafting of instructions, and clarification of definitions, or the streamlining of terminology?

MSCI highlights two points from our perspective as a data provider. First, template simplifications should be weighed explicitly against their impact on data availability further down the reporting chain. For example, the recent reduction in Nuclear & Gas template data points means banks now need Total Gross Carrying Amount figures for counterparties' non-eligible N&G exposure which is no longer reported. Second, despite recent simplifications we continue to observe significant reporting inconsistencies. Building automatic internal-consistency checks into the templates themselves, so that totals reconcile to their components and to the sum by objective, would materially improve data quality and auditability at source.

Name of the organization