Banking & Sustainability: Update on the EU taxonomy - simplification of reporting requirements
The European Commission has presented a draft delegated act on the EU taxonomy, which simplifies the disclosure requirements for banks and companies. The aim is to reduce the administrative burden and improve the applicability of the taxonomy without compromising the transparency or quality of sustainability reporting.
Background:
The Taxonomy Regulation (2020/852) establishes a uniform EU classification system for sustainable economic activities. Article 8 of this regulation requires certain financial and non-financial companies to disclose their environmentally sustainable activities. To implement these transparency requirements, the European Commission has adopted several Delegated Regulations, including the Climate Taxonomy Regulation (2021/2139) and the Environmental Taxonomy Regulation (2023/2486).
The draft submitted for consultation is aimed at more efficient and targeted reporting. The key changes include:
Materiality thresholds:
In future, companies will only have to evaluate economic activities that account for at least 10% of total turnover, capital expenditure (CapEx) or operating expenditure (OpEx). A higher threshold of 25% applies to OpEx reports.
Reduction in the scope of reporting:
The number of data points required for non-financial companies is reduced by 66%, for banks by as much as 89%. The presentation of non-sustainable activities is no longer required.
Adaptation of the "Do No Significant Harm" criteria (DNSH):
The DNSH criteria are necessary to ensure that an economic activity does not cause significant harm to other environmental objectives. However, companies report that some of these criteria, particularly in relation to chemical substances, are difficult to implement. In order to facilitate applicability and increase legal clarity, the draft provides for the following adjustments, among others:
- Clarification of exemptions and harmonization with EU environmental law
- Deletion or adaptation of certain requirements for the identification and monitoring of chemical substances
- Reducing the administrative burden for companies by simplifying documentation requirements
Shift in KPIs for financial institutions:
Certain key performance indicators, such as the Green Asset Ratio (GAR) for trading or commission income, will not become mandatory until 2027.
Impact on companies and financial institutions
The proposed amendments will significantly reduce the burden on companies subject to reporting requirements. Companies with diverse business areas will benefit in particular, as it will no longer be necessary to check each individual activity for compliance. In addition, the comparability of the reports is increased as duplications and information that is not relevant to decision-making are eliminated.
The implementation of the taxonomy will be gradually simplified for financial institutions, in particular through the introduction of clearly defined thresholds and the deferral of certain KPIs. This enables banks and investors to focus specifically on truly sustainable investments.
Conclusion and outlook
The planned changes to the EU taxonomy represent an important step towards the practical implementation of sustainable financial flows. The simplification of reporting standards enables companies to focus more on the implementation of sustainable projects rather than on administrative requirements.
The new regulations are due to come into force on January 1, 2026. Companies should deal with the changed reporting obligations at an early stage and adapt their internal processes if necessary. As CURENTIS AG, we will be happy to assist you in preparing for the new requirements in the best possible way.
