EU: European Commission sets out proposals to simplify Taxonomy Delegated Acts

What has been published?

To accompany the European Commission’s Sustainability Omnibus package, published on 26 February 2025 (see our blog post for more detail), the Commission has published a call for evidence on proposed amendments to the:

1) Taxonomy Disclosures Delegated Act;

(2) Taxonomy Climate Delegated Act; and

(3) Taxonomy Environmental Delegated Act.

The purpose of the amendments is to simplify reporting requirements, most notably by introducing a financial materiality threshold and reducing reported data points by around 70%.

Timing

Only open for four weeks, the consultation is due to close on 26 March 2025, and its adoption has been tentatively planned by the Commission for Q2 2025. It applies from 1 January 2026.

Key proposed amendments

Article 8 reporting – scoping 

The Omnibus simplification package proposes to reduce the impact of CSRD by increasing the thresholds for undertakings included within its scope – read more about this in our related blog post. The CSRD reduction in scope and timing-related changes will equally apply to Article 8 Taxonomy reporting – e.g., EU firms with fewer than 1000 employees on an individual/consolidated basis will be out of scope of both CSRD and Article 8 Taxonomy reporting if the proposed changes go ahead. 

However, even if a firm remains in scope of CSRD (because it has 1000 employees), if its net turnover:

• is EUR 450m or less – it will not be mandated to do Article 8 Taxonomy reporting, rather the regime will become voluntary – unless the firm claims to have Taxonomy aligned activities (or if the firm claims to have activities which fulfil certain Taxonomy criteria). In this case, the Taxonomy reporting can be more “flexible” (although it is unclear how exactly it would become more “flexible” – potentially the reporting only needs to relate to the activities which the firm claims to be Taxonomy-aligned/to fulfil certain Taxonomy criteria). The Commission is mandated to develop delegated acts to ensure standardisation in terms of the content and presentation of the reporting;
• is above EUR 450m – Article 8 Taxonomy reporting will be mandatory. Although see the comments below on potential simplifications to the Taxonomy regime.

The Omnibus and consultation do not propose to change the position for undertakings reporting under Article 40a, Accounting Directive at an ultimate parent undertaking level. Article 40a CSRD reports do not need to include Taxonomy reports.

New de minimis threshold based on financial materiality: the amendments propose that economic activities be excluded from Taxonomy eligibility/alignment calculations if they are not financially material (assessed by a 10% threshold) for the business. This means (for example):

• For asset managers: if particular AUM represent under 10% of the total AUM, then the asset manager does not need to assess whether those investments are Taxonomy-eligible/-aligned, and can present them as non-material Note: however, on such a reading a public asset manager would have nothing to report, as they wouldn’t normally hold more than 10% of an investment – and so the application of this 10% rule will likely need to be clarified; and
• For credit institutions: if on-balance sheet assets represent under 10% of the denominator of the Green Asset Ratio (GAR), the credit institution does not need to assess whether those assets are Taxonomy-eligible/-aligned. 

Simplifying key performance indicators (KPIs) of financial institutions

• Among others, the main Taxonomy-based KPI for banks, the GAR, will be able to exclude from the denominator of the GAR, exposures that relate to undertakings which are outside the future scope of the Corporate Sustainability Reporting Directive (CSRD) on an individual basis (i.e., companies with fewer than 1,000 employees or which do not meet the large undertaking tests). Previously exposures to undertakings out of scope of CSRD could be excluded from the numerator but not from the denominator.
• To ensure that the requirement to report on Taxonomy-related information remains proportionate, the Commission proposes that application of the Trading Book KPI, and Fees and Commission KPI is postponed until 1 January 2027 (instead of the original start date of 1 January 2026).

Simplification of reporting templates

• The Commission proposes to reduce the complexity and length of the reporting templates by: 
  • Introducing one static template instead of three, for summary information, where the KPIs will be presented according to current rules in ‘per activity information’. This summary template will keep only the immediately useful datapoints and the information that firms need to compute their own Taxonomy KPIs, whilst removing summary information on non-eligible activities.
  • Introducing the reporting of one activity per row, thereby simplifying the ‘per activity’ information. This will suppress; reporting on separate rows on the portions of activity aligning with different objectives; reporting separately on DNSH and minimum safeguards, any contribution to multiple objectives; and reporting of explicit information for non-aligned activities (these can be still derived implicitly from the datapoints that remain).

The Commission believes that for credit institutions, this simplification of templates will result in a reduction of reported data points by 89%.

The Commission notes that these burden reduction and simplification measures should be prioritised and distinguished from an ongoing review of the Disclosures Delegated Act that requires more time and policy assessment and that will be tabled separately in due course. The review will consider options for more substantive changes in the current reporting framework, in particular on how the issues related to the difference in the scope of the numerator and denominator of the current GAR could be best addressed.

Options to simplify the most complex DNSH criteria

The Commission is seeking feedback on two alternative options for simplifying the most complex DNSH criteria for pollution prevention and control related to the use and presence of chemicals that apply horizontally to all economic sectors under the EU Taxonomy. It is understood that this is a first step in revising and simplifying all such DNSH criteria.

Timing and next steps

The call for evidence closes for feedback on 26 March 2025. The Delegated Act is planned to be adopted in Q2 2025 and will enter into force on the twentieth day following its publication in the Official Journal of the EU. It will apply from 1 January 2026.

The call for evidence published on 26 February 2025 is available here.