Given the Commission’s interpretative Q&A II.1 notes that sustainable investments can be measured at economic activity and at the investment level, how can financial products do this in practice? The

Given the Commission’s interpretative Q&A II.1 notes that sustainable investments can be measured at economic activity and at the investment level, how can financial products do this in practice? The ESAs have prepared a table below showing how the calculations of sustainable investment can be done either at the economic activity or the investment level. This table displays hypothetical financial product examples with illustrative, hypothetical objectives and investment strategies. The three hypothetical products in the table are a climate product (bond focus), an SDG Product (bond focus) and a social impact product (equity focus) and their respective objectives are stated in the subsequent brackets. Companies and economic activities are likewise hypothetical cases. Section A displays a hypothetical analysis of the Contribution to Objectives (“C2O”) of an Economic Activity, where the list of potential contributions aligned with the Article 2(17) SFDR is non-exhaustive. Section B features DNSH criteria of Economic Activities or Company, where the hypothetical assessments are limited to “no harm”, “no significant harm”, and “significant harm”. 1% 15% 2% 12% 34.50% 8% 87% 50.50% 90% OpEx CapEx Turnover 0% 50% 100% 1. Taxonomy alignment of investments including sovereign bonds* Taxonomy-aligned: Nuclear Taxonomy-aligned (no gas and nuclear) Non Taxonomy-aligned 10% 49,50% 13% 1.11% 16.67% 2.22% 13.33% 38.33% 8.89% 85.56% 45.00% 88.89% OpEx CapEx Turnover 0% 50% 100% 2. Taxonomy alignment of investments excluding sovereign bonds* Taxonomy-aligned: Nuclear Taxonomy-aligned (no gas and nuclear) Non Taxonomy-aligned 11,11% 55% 14,44% Section C features the assessment of Good Governance characteristics of the Companies, where the criteria are aligned with Article 2(17) SFDR yet are non-exhaustive. Section D, E and F provide illustrative, hypothetical financial information, product weights and ring-fencing to contextualise the examples. Please note that the table is only intended to provide an example of how calculations for sustainable investment can be made and should not be referred to for any other purpose. Hypothetical Product Examples (and Product Objectives) Climate Product (bond focus) (Objectives for Energy, GHG emission and Renewable Energy) SDG Product (bond focus) (All 2(17) objectives apply) Social Impact Product (equity focus) (Objectives for Tackling inequality, fostering social cohesion and/or integration, and investing in economically and/or socially disadvantaged communities) Company (hypothetical examples) Company A Company B Company C Company D Company E Company A Company F Company G Economic Activity (hypothetical examples) Activity 0001 Activity 0002 Activity 0003 Activity 0001 Activity 0004 Activity 0001 Activity 0003 Activity 0004 Activity 0005 Activity 0001 Activity 0002 Activity 0003 Activity 0006 Activity 0007 Activity 0005 Section A: Contribution to Objectives (C2O) of Economic Activities More Efficient Use of Energy insufficient contribution sufficient contribution no contribution insufficient contribution no contribution insufficient contribution no contribution no contribution sufficient contribution objective not selected Relatively More Use of Renewable Energy sufficient contribution sufficient contribution no contribution sufficient contribution no contribution sufficient contribution no contribution no contribution insufficient contribution objective not selected More Efficient Use of Raw Materials objective not selected no contribution no contribution sufficient contribution objective not selected More Efficient Use of Water objective not selected no contribution no contribution sufficient contribution objective not selected More Efficient Use of Land objective not selected no contribution no contribution sufficient contribution objective not selected Less Production of Waste objective not selected no contribution no contribution sufficient contribution objective not selected Less Production of Greenhouse Gas Emissions sufficient contribution sufficient contribution no contribution sufficient contribution no contribution sufficient contribution no contribution no contribution sufficient contribution objective not selected Reducing Impact on Biodiversity objective not selected no contribution no contribution insufficient contribution objective not selected Advancing Impact on Circular Economy objective not selected no contribution no contribution sufficient contribution objective not selected Tackling Inequality objective not selected insufficient contribution insufficient contribution insufficient contribution insufficient contribution insufficient contribution insufficient contribution insufficient contribution insufficient contribution insufficient contribution Fostering social cohesion objective not selected no contribution no contribution insufficient contribution sufficient contribution sufficient contribution no contribution insufficient contribution sufficient contribution insufficient contribution Fostering social integration objective not selected no contribution no contribution sufficient contribution no contribution no contribution no contribution insufficient contribution insufficient contribution sufficient contribution Fostering labour relations objective not selected sufficient contribution sufficient contribution insufficient contribution objective not selected Investing in human capital objective not selected no contribution no contribution sufficient contribution objective not selected Investing in economically disadvantaged communities objective not selected sufficient contribution sufficient contribution insufficient contribution sufficient contribution sufficient contribution sufficient contribution insufficient contribution sufficient contribution insufficient contribution Investing in socially disadvantaged communities objective not selected no contribution no contribution insufficient contribution insufficient contribution insufficient contribution no contribution sufficient contribution sufficient contribution insufficient contribution C2O Test outcome pass pass fail pass fail pass pass pass pass pass pass pass pass pass pass Page 1 of 3 | Notes: This table displays hypothetical financial products with illustrative hypothetical objectives and investment strategies. The three hypothetical products are Climate Product, SDG Product and Social Impact Product and their respective objectives are stated in the subsequent brackets. Companies and Activities are likewise hypothetical cases. Section A displays a hypothetical analysis of the Contribution to Objectives (C2O) of an Economic Activity, where the list of potential contributions is aligned with Article 2(17) SFDR yet is non-exhaustive. Sections B-F are explained in the notes to the following pages. Hypothetical Product Examples (and Product Objectives) Climate Product (bond focus) (Objectives for Energy, GHG emission and Renewable Energy) SDG Product (bond focus) (All 2(17) objectives apply) Social Impact Product (equity focus) (Objectives for Tackling inequality, fostering social cohesion and/or integration, and investing in economically and/or socially disadvantaged communities) Company (hypothetical examples) Company A Company B Company C Company D Company E Company A Company F Company G Economic Activity (hypothetical examples) Activity 0001 Activity 0002 Activity 0003 Activity 0001 Activity 0004 Activity 0001 Activity 0003 Activity 0004 Activity 0005 Activity 0001 Activity 0002 Activity 0003 Activity 0006 Activity 0007 Activity 0005 Section B: DNSH criteria of Economic Activities or Companies GHG emissions no significant harm no significant harm no significant harm no significant harm significant harm no significant harm no significant harm significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm Carbon Footprint no significant harm no significant harm no significant harm no significant harm significant harm no significant harm no significant harm significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm GHG intensity no significant harm no significant harm no significant harm no significant harm significant harm no significant harm no significant harm significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm Fossil Fuel Exposure no harm no harm no significant harm no harm significant harm no harm no significant harm significant harm no harm no harm no harm no significant harm no harm no significant harm no harm Non-Renewable Energy Production no harm no harm no significant harm no harm significant harm no harm no significant harm significant harm no harm no harm no harm no significant harm no harm no significant harm no harm Non-Renewable Energy Consumption no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm Exposure to high impact climate sectors no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm Impact on biodiversity sensitive areas no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm no significant harm no significant harm no significant harm no significant harm significant harm no harm Emissions to Water no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm Hazardous Waste Ratio no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm OECD violations no significant harm no significant harm no significant harm no harm no harm no harm no significant harm no significant harm no harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm UNGC violations no significant harm no significant harm no significant harm no harm no harm no harm no significant harm no significant harm no harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm Unadjusted Gender Pay Gap no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm no significant harm no significant harm no significant harm no harm no harm no significant harm Board Diversity no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no significant harm no harm no significant harm no significant harm no significant harm no harm no harm no significant harm Exposure to controversial weapons no harm no harm no harm no harm no harm no harm no significant harm no significant harm no harm no harm no harm no harm no harm no harm no harm DNSH Test outcome pass pass pass pass fail pass pass fail pass pass pass pass pass fail pass Page 2 of 3 | Notes: This Table displays Hypothetical Product Examples with illustrative, hypothetical objectives and investment strategies. The three hypothetical products are Climate Product, SDG Product and Social Impact Product and their respective objectives are stated in the subsequent brackets. Companies and Activities are likewise hypothetical cases. Section B features DNSH criteria of Economic Activities or Company, where the hypothetical assessments are limited to no harm, no significant harm, and significant harm. Section A is explained in the notes on the previous page and Sections C-F are explained in the notes on the final page. Hypothetical Product Examples (and Product Objectives) Climate Product (bond focus) (Objectives for Energy, GHG emission and Renewable Energy) SDG Product (bond focus) (All 2(17) objectives apply) Social Impact Product (equity focus) (Objectives for Tackling inequality, fostering social cohesion and/or integration, and investing in economically and/or socially disadvantaged communities) Company (hypothetical examples) Company A Company B Company C Company D Company E Company A Company F Company G Economic Activity (hypothetical examples) Activity 0001 Activity 0002 Activity 0003 Activity 0001 Activity 0004 Activity 0001 Activity 0003 Activity 0004 Activity 0005 Activity 0001 Activity 0002 Activity 0003 Activity 0006 Activity 0007 Activity 0005 Section C: Good Governance of Companies Governance Structures Very Good Very Good Very Good Good Good Very Good Good Good Very Bad Very Good Very Good Very Good Good Good Good Management Structures Very Good Very Good Very Good Very Good Very Good Very Good Good Good Good Very Good Very Good Very Good Good Good Good Employee Relations Very Good Very Good Very Good Very Good Very Good Very Good Good Good Very Good Very Good Very Good Very Good Very Good Very Good Good Employee Remuneration Good Good Good Very Good Very Good Good Very Good Very Good Very Good Good Good Good Good Good Good Tax Compliance Good Good Good Very Good Very Good Bad Good Good Very Bad Good Good Good Good Good Very Good Good Governance Test pass pass pass pass pass fail pass pass fail pass pass pass pass pass pass Section D: Financial Information (illustrative numbers; as a % of company) Capex 70 20 10 95 5 100 60 40 100 70 20 10 15 85 100 Turnover 50 20 30 70 30 100 50 50 100 50 20 30 5 95 100 Summary of Test outcomes C2O Test pass pass fail pass fail pass pass pass pass pass pass pass pass pass pass DNSH Test pass pass pass pass fail pass pass fail pass pass pass pass pass fail pass Good Governance Test pass pass pass pass pass fail pass pass fail pass pass pass pass pass pass Resulting Sustainable Investment (SI) % at Security (S) Level SI % (S = Company) 100 0 0 0 0 100 0 100 SI % (S = Activity) 100 100 0 0* 0 0 100 0 100 100 100 100 0* 0 100 Section E: Product Weights (illustrative numbers; it is assumed in these examples that activity weight is based on the company weight multiplied by the turnover generated by each activity) Company Weight in Product: 33.3% 33.3% 33.3% 50% 50% 40% 40% 20% Activity Weight in Product: 16.7% 6.7% 10.0% 23.3% 10.0% 33.3% 25% 25% 50% 20% 8% 12% 2% 38% 20% Section F: Ring-fencing of Activity from the rest of the company (thereby allowing a SI% for an activity where the company is a fail) Ring-fenced?