European Commission advisory body outlines proposal for revamped Taxonomy

On 5 February 2025, the Platform on Sustainable Finance (the “Platform”) – an advisory body to the European Commission (“EC”) – published a report setting out its recommendations to simplifying reporting under the EU Taxonomy Regulation (the “Report”).

Background

In March 2023, the EC gave a mandate to the Platform to help simplify and improve the effectiveness of the Taxonomy Regulation by enhancing its usability.

A pivotal development in this regard is the announcement by EC President Ursula von der Leyen in November 2024 to consolidate EU sustainability reporting requirements into a single ‘Omnibus’ regulation. The EC has committed to streamlining reporting requirements, with the aim of improving implementation across the EU (you can read more about the proposed Omnibus regulation here).

Simplification inevitably requires the review of the Taxonomy Regulation and its Delegated Acts. The Report therefore presents specific proposals to revising the Taxonomy Disclosures Delegated Act. The Platform has also worked on the review of the Climate Delegated Act, and further work – as highlighted in the Platform’s draft technical criteria report – is likely to be conducted.

The four core proposals

The Report makes four core proposals to the EC for simplifying reporting under the Taxonomy Regulation:

1. More than one-third reduction in corporate reporting burden with:

1. Adjusting the OpEx KPI as a voluntary disclosure, except for R&D;
2. Introducing a materiality threshold for reporting the Turnover, OpEx and CapEx KPIs and, as well as the combined KPIs of financial companies, in line with the Accounting Directive;
3. Enhancing the alignment with financial reporting; and
4. Simplifying reporting templates, with a clear reduction of data points to limit the reporting to information that is relevant for making business decisions.
    

2. A simplified Green Asset Ration (“GAR”) that encourages green and transition lending:

1. Ensuring a symmetrical GAR with similar numerator and denominator composition;
2. Simplifying retail exposure reporting, focusing on substantial contribution;
3. Allowing for estimates and proxies for reporting, in conjunction with safe harbours to protect against greenwashing allegations; and
4. The materiality principle should apply to the combined KPI for financial undertakings, excluding immaterial business segments not consolidated under the Accounting Directive.

3. A practical approach to Do No Significant Harm (“DNSH”) criteria:

1. Introducing a lighter compliance assessment process (regarding evidence of compliance, documentation and/or on EU regulations);
2. All DNSH criteria should be reviewed as part of the scheduled reviews of the various Delegated Acts, prioritising their usability and practicality for financial and non-financial companies; and
3. Introducing a "comply or explain" approach for DNSH assessment of the Turnover KPI, as a temporary measure.

4. Helping SMEs access sustainable finance:

1. Adopting a streamlined and voluntary approach for banks and investors’ exposures to unlisted SMEs; and
2. Adopting a simplified approach to the Taxonomy Regulation for listed SMEs.

Next steps

The EC will consider the Platform’s proposals as part of its wider streamlining of the EU sustainability reporting regime.

The Platform will also present the Report in a webinar from 14:00 to 15:00 CET on 14 February 2025, which you can register to attend here.