Simplifying the EU taxonomy to foster sustainable finance
EU Platform on Sustainable Finance plublished a report that should enhance its the taxonomy's effectiveness.
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The Platform on Sustainable Finance, an advisory body to the Commission, has published a report that presents a set of evidence‑based recommendations to simplify taxonomy reporting and enhance its effectiveness.
Following a comprehensive review of market practices, pilot projects, and stakeholder feedback from investors, banks, insurers, corporates, SMEs, auditors, and consultants, the report identifies key areas for improvement, including simplification, data access, and regulatory coherence. Building on previous work, including the recommendations on data and usability (2022) and the compendium of market practices (2024), the report provides targeted recommendations to the European Commission.
The report proposes five main measures to simplify taxonomy reporting
- refining the "do no significant harm" (DNSH) assessment and reporting obligations by distinguishing between users (non‑financial vs. financial entities), uses (turnover vs. capital expenditure), and geographies (EU vs. non‑EU exposures)
- introducing a materiality principle applicable to all entities, materiality thresholds for all non‑financial company key performance indicators (KPIs), and a simplified DNSH assessment for the turnover KPI. Additionally, clarifying the KPIs related to operational expenditures (OpEx KPIs) calculation while limiting its mandatory scope to research and development (R&D)
- defining clear guidelines for the use of estimates within the taxonomy framework and establishing safe harbours for financial sector reporting
- allowing proxies and estimates across all assets in the context of the green asset ratio (GAR) and green investment ratio (GIR), while introducing a simplified retail assessment and a reduced denominator for asset classes strictly measurable against the taxonomy
- developing simplified and voluntary approaches for small and medium‑sized enterprises (SMEs), as well as for banks and investors, to integrate the taxonomy into their disclosure
Refer to the report in the reports section on ESG.Guide.