Sustainable finance
EU Taxonomy Regulation
Published Reviewed
What is EU Taxonomy?
The EU Taxonomy classifies when economic activities are environmentally sustainable using technical criteria, safeguards and tests for substantial contribution and significant harm.
| Jurisdiction | European Union |
|---|---|
| Authority | Regulation (EU) 2020/852 |
| Current status | In force since 12 July 2020; criteria phased |
| Reviewed |
Why it matters operationally
The Taxonomy is the dictionary the rest of EU sustainable-finance law reads from: it defines, activity by activity, what counts as environmentally sustainable — through technical screening criteria, a do-no-significant-harm test and minimum social safeguards. For reporting companies it becomes three audited KPIs — the taxonomy-aligned share of turnover, capex and opex — and for fund managers it feeds directly into SFDR product disclosure. Its templates and thresholds have been amended toward simplification through the Omnibus process, which changes the mechanics but not the direction: alignment claims need activity-level evidence.
Are you aware?
The dates that bind
The full framework is live
Climate mitigation and adaptation criteria applied first; the delegated acts for the four remaining objectives — water, circular economy, pollution, biodiversity — apply for reporting periods since 2024. Eligibility screening now spans all six.
The three KPIs recur with your management report
In-scope companies report taxonomy-aligned turnover, capex and opex under Article 8 each year, with the sustainability statement — subject to assurance, not marketing review.
Simplified templates and materiality thresholds
The Omnibus simplification introduces materiality thresholds and slimmer templates for taxonomy reporting. Companies near scope boundaries should date-stamp which regime each reporting year falls under.
Where to start
- 1
Screen your revenue-generating activities against the taxonomy’s activity list — eligibility first, alignment second; the two are routinely confused.
- 2
For each eligible activity, assemble the alignment file: technical screening criteria met, do-no-significant-harm assessed, minimum safeguards documented.
- 3
Reconcile the three KPIs with finance — turnover, capex and opex splits must tie to the audited accounts, not to a sustainability spreadsheet.
Authority links
Read the official sources
The official text is the authority. This guide is only a short orientation for operational planning.
Common questions
Frequently asked questions
What is the difference between eligible and aligned?
Eligible means the activity is described in the taxonomy at all; aligned means it also meets the technical screening criteria, does no significant harm to the other objectives, and respects minimum safeguards. Markets read the gap between the two numbers as your credibility.
Who has to report against the Taxonomy?
Companies in CSRD scope, via Article 8 of the Taxonomy Regulation — plus financial-market participants whose SFDR disclosures reference taxonomy alignment of their products. The timing follows your CSRD wave.
Does "do no significant harm" really get checked?
Yes — it is the test most alignment claims fail. An activity meeting the climate criteria can still be non-aligned because it harms water, circularity, pollution or biodiversity objectives, and assurance providers ask for the assessment behind each DNSH conclusion.
Side by side
Compared against
Key terms in this guide
A quick self-check
Are you ready?
- Could you list your taxonomy-eligible activities today, with the aligned subset and the evidence file behind each?
- Do your three KPIs reconcile to the audited financial statements?
- Is someone tracking the simplified templates so next year’s reporting is planned under the right regime?
Every question above has a written, evidence-backed answer in a well-run compliance record. If one made you pause, that pause is the gap.