BUSINESS SITUATION
The client sought our expertise to ensure their portfolio's adherence with the Non-Financial Reporting Directive (NFRD) and Article 8 requirements of the EU taxonomy regulation. They required a comprehensive assessment of eligible, aligned, enabling, and transitional activities related to their portfolio's investment and revenue across the six specific objectives of the EU taxonomy. Additionally, they required continuous updates to the data collection to account for changes in their list of portfolio companies. Furthermore, the client needed the capability for rapid expansion and efficient conclusion of analysis across a vast portfolio universe comprising 8,000 companies.
SGA APPROACH
- Understanding Client Strategy and Objectives: Thoroughly grasped the client’s overarching strategy, key objectives, and ultimate goals driving the development of their EU Taxonomy database for the portfolio.
- Comprehensive Research Scope: Conducted research encompassing over 8,000 companies across Europe, spanning diverse sectors including construction & real estate, transportation, energy, BFSI, and manufacturing.
- Expert Team Formation: Formed a team of 20 Subject Matter Experts (SMEs) in taxonomy regulation to implement a rigorous data aggregation and validation process, ensuring the accuracy and integrity of the collected data. This involved cross-verifying information from multiple sources when necessary.
- Taxonomy Alignment Assessment: Conducted comprehensive research on companies' activities, categorizing them as eligible and aligned with EU taxonomy regulations. Evaluated portfolio alignment across eligible, aligned, enabling, and transitional taxonomy activities, using over 30 unique KPIs. The KPIs spanned across financial and non-financial sectors, in accordance with EU regulation and Article 8 annexures.
- Data Collection from Reliable Sources: Identified and collected data from reliable and reputable sources for taxonomy information, including public disclosures, sustainability reports, websites, policies, integrated reports, etc.
- Historical Data Update: Reiterated the taxonomy data for each of the six objectives related to activity and aggregate level transactions from the previous year's historical records, wherever such significant changes were highlighted in the current year's published information.
- Ensuring Reporting Accuracy: Conducted diligent checks for double counting of green bonds in the context of adjusted capital expenditures (CapEx) related to the EU Taxonomy. This was done to ensure that the same expenditures were not counted more than once, whether within the same reporting framework or across different frameworks. By doing so, we ensured the accuracy and compliance of their financial reports with EU Taxonomy and green bond standards.
ENGAGEMENT
The client engaged our services to assess their portfolio's alignment with EU taxonomy theme indicators. This involved gathering detailed activity-level data on the company's investments and revenues by aggregating information from various sources such as public reports, filings, websites, exchanges, sustainability reports, and policies.
BENEFITS & OUTCOME
- Alignment Assessment: Enhanced clarity on the alignment of eligible activities within the client portfolio, ensuring compliance with EU regulations and Article 8 annexures.
- Continuous Integration: Catered to the client's weekly updated list of portfolio companies, enabling them to swiftly showcase their portfolio's alignment with taxonomy regulations.
- Data Harmonization: Improved data coherence and accuracy through normalization of taxonomy-related revenue and investment figures, reducing redundancy.
KEY TAKEAWAY
- Catering to Dynamic Portfolio: Catered to the client's requirement by aggregating taxonomy data to accommodate their rapidly changing and constantly updating portfolio.
- Establishing SME Team for Data Integrity and Accuracy: Assembled a team of SMEs to implement a rigorous data aggregation and validation process, ensuring high standards of precision and reliability.
- Historical Data Revision: Updated historical data by revisiting taxonomy information to reflect significant changes identified in the current year's published records
