The green asset ratio (GAR)
The green asset ratio is the share of a bank's covered assets that finance taxonomy-aligned activities, measured against the EU taxonomy. Credit institutions publish it under Article 8 of the Taxonomy Regulation as the main key figure of their taxonomy disclosure.
How the GAR is calculated
The rules are in Delegated Regulation (EU) 2021/2178. The ratio compares the exposures that finance taxonomy-aligned activities with the bank's total covered assets. It looks at the main lending and investment business: loans and advances, debt securities and equity holdings in the banking book.
Exposures to central governments, central banks and supranational issuers are left out of the calculation, and so is the trading book. Derivatives never count toward the numerator. Credit institutions have disclosed the GAR since January 1, 2024. The EBA's advice to the Commission from March 2021 allowed estimates and proxies during a transition period.
What the taxonomy simplification changes
The European Commission adopted a simplification of the taxonomy disclosure rules on July 4, 2025. It applies from January 1, 2026 and covers the 2025 financial year, with the option to start one year later.
According to KPMG, activities that together stay below 10 percent of the KPI denominator count as not material, and the reporting templates of financial companies lose 89 percent of their data points. For the GAR, exposures to companies outside the future scope of the CSRD leave the denominator. The KPIs on the trading book and on fee and commission income start only with reports in 2028 on the 2027 financial year.
Where the numbers come from
A bank can only count an exposure as aligned when it knows how its counterparty's business matches the taxonomy. For large corporate borrowers the figure comes from their own taxonomy disclosures under the CSRD; for a company outside that regime there is no such figure. The denominator change follows this logic: exposures that can never enter the numerator no longer dilute the ratio.
The same counterparty and collateral data feeds the bank's ESG risk management. A bank that collects it once, with clear lineage from the source, serves both the disclosure and the risk side.
Upcoming events on risk and compliance
Who has to report the green asset ratio?
Credit institutions that fall under the sustainability disclosure duty of Article 8 of the Taxonomy Regulation. Asset managers, insurers and investment firms publish their own KPIs under the same delegated regulation; the GAR is the one for banks.
What is a good green asset ratio?
The regulation sets no target and no minimum. The GAR depends on the business model: a bank with a large mortgage book and a bank that lends to small firms outside the CSRD can report very different ratios with the same climate strategy. The figure says more when it is read together with the bank's transition plan.
Is the green asset ratio a capital requirement?
No. It is a disclosure figure and does not change the capital a bank must hold. Capital and risk questions around climate run through the ESG risk rules and the supervisor's SREP.
The green asset ratio and Finance Loop
Finance Loop connects the finance, IT and AI communities, and the GAR needs finance people who own the number and data teams who trace it back to each loan. Finance Loop was media partner of the International Financial Standards Conference in Frankfurt, where ESG disclosure was on the program.
Finance Loop is a professional network and has the goal of driving the adoption of emerging technologies in finance, such as AI, digital payments, cloud and blockchain solutions. Finance Loop helps its members build skills and personal networks in these fields: Investment & Digital Assets, Payments & Digital Money, Digital Infrastructure & Sovereignty, and Risk & Compliance.