EBA advises the Commission on KPIs for transparency on institutions’ environmentally sustainable activities, including a green asset ratio

• The proposed key performance indicators (KPIs), notably the Green Asset Ratio, will help stakeholders understand institutions’ pathway towards sustainability and financing activities such as those consistent with the Paris agreement.
• Proportionality measures and policy recommendations to the Commission are advised in order to facilitate institutions’ disclosures and eventually extend the scope of the KPIs.
• The EBA has developed this Advice in parallel and consistently with its Consultation Paper on Pillar 3 disclosures on ESG risks, including a common proposal for a Green Asset Ratio (GAR).

The European Banking Authority (EBA) published today an Opinion in response to the Commission’s call for advice on KPIs and related methodology for the disclosure by credit institutions and by investment firms of information on how and to what extent their activities qualify as environmentally sustainable in accordance with the EU Taxonomy. In the advice, the EBA underlines the importance of the green asset ratio, supported by other KPIs, as a key means to understand how institutions are financing sustainable activities and meeting the Paris agreement targets.

In the Opinion and accompanying report and annexes, the EBA elaborates on the KPIs that institutions should disclose, on the scope and methodology for the calculation of those KPIs, and on the qualitative information they should provide. In addition, the EBA  includes some policy recommendations to the Commission to put in place means to facilitate institutions’ disclosures and the eventual extension of the KPIs to all relevant assets, including sovereign and central banks’ exposures.

The main KPI proposed is the GAR, which identifies the institutions’ assets financing activities that are environmentally sustainable according to the EU taxonomy, such as those consistent with the European Green Deal and the Paris agreement goals. Information on the green asset ratio is supplemented by other KPIs that provide information on the taxonomy-alignment of institutions’ services other than lending and investing. The EBA has also integrated proportionality measures that should facilitate institutions’ disclosures, including transitional periods where disclosures in terms of estimates and proxies are allowed.

Background

The EBA is publishing this Advice following the Commission’s call for advice received in September 2020.

While the Commission’s call for advice is addressed to the three ESAs, it includes separate questions for EBA, EIOPA and ESMA, related to the corporates under the jurisdiction of each Authority, banks and investment firms in the case of the EBA. For this reason, the three ESAs are providing separate answers to the call for advice (EMSA,  EIOPA), although the responses have been coordinated in order to ensure consistent proposals.