The EU taxonomy (Regulation (EU) 2020/852) is a classification system for environmentally sustainable economic activities and a central component of the EU sustainable finance framework. It provides companies, financial market participants, and investors with a common definition of which economic activities may be considered environmentally sustainable.
By improving transparency and comparability, the Taxonomy is intended to help direct capital towards activities that support the EU’s environmental objectives, including its 2030 climate and energy targets and the objective of achieving climate neutrality by 2050. It also aims to reduce market fragmentation and the risk of greenwashing.
EU Taxonomy covers six environmental objectives:
An economic activity qualifies as environmentally sustainable only if it substantially contributes to at least one of these objectives, does not significantly harm any of the other objectives, complies with minimum safeguards, and meets the applicable technical screening criteria.
Undertakings within the scope of Article 8 of the Taxonomy Regulation must disclose information on their Taxonomy-eligible and Taxonomy-aligned economic activities.
The Taxonomy itself may also be used voluntarily by companies and investors as a classification and financing tool. However, the disclosures under Article 8 are mandatory for undertakings that are required to publish sustainability information pursuant to Articles 19a or 29a of the Accounting Directive.
The specific disclosure requirements differ between non-financial and financial undertakings. Their content, calculation methodology, and presentation are set out in Commission Delegated Regulation (EU) 2021/2178, as subsequently amended.
The Taxonomy Regulation (EU) 2020/852 establishes the framework for identifying environmentally sustainable economic activities. The content, methodology, and presentation of the related disclosures are specified in Commission Delegated Regulation (EU) 2021/2178, the Taxonomy Disclosures Delegated Act.
The framework was expanded in 2023 through Commission Delegated Regulation (EU) 2023/2486, which introduced technical screening criteria for the four remaining environmental objectives: the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection and restoration of biodiversity and ecosystems.
Financial and non-financial undertakings within the applicable scope are required to disclose qualitative and quantitative information annually. Non-financial undertakings disclose the proportion of their Turnover, Capital Expenditure, and Operating Expenditure associated with Taxonomy-eligible and Taxonomy-aligned activities. Financial undertakings disclose sector-specific KPIs reflecting the extent to which their financing, investment, or underwriting activities are associated with environmentally sustainable economic activities.
For credit institutions, the disclosure requirements include the Green Asset Ratio and supplementary information on relevant on- and off-balance-sheet exposures. The disclosures are accompanied by qualitative information on the scope of the assessment, the methodology and data sources used, and relevant limitations.
The extension to all six environmental objectives substantially increased the granularity and complexity of the original disclosure templates. However, Commission Delegated Regulation (EU) 2026/73 subsequently simplified the framework by reducing and restructuring the required data points, introducing materiality considerations, and streamlining the templates. These simplifications apply from 1 January 2026 and cover the 2025 financial year, although undertakings may choose to apply them starting with the 2026 financial year.
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