The EU's Regulation on the establishment of a framework to facilitate sustainable investment (the Taxonomy Regulation) was published in the Official Journal of the EU (the OJ) on 22 June 2020.
What does the Taxonomy Regulation cover?
(i) What is the taxonomy and why is it needed?
The Taxonomy Regulation establishes a classification system (or taxonomy) which provides businesses with a common language to identify whether or not a given economic activity should be considered "environmentally sustainable".
This allows it to be determined how far an investment is environmentally sustainable, or 'green'.
Standardising the concept of environmentally sustainable investment across the EU is meant to both:
- facilitate investment in environmentally sustainable economic activities; and
- help economic operators attract investment from abroad more easily.
(ii) When is an economic activity considered to be "environmentally sustainable"?
Where it:
- contributes substantially to any of a series of defined environmental objectives;
- doesn't significantly harm any of the environmental objectives;
- complies with a series of minimum social safeguards; and
- complies with specified performance thresholds known as "technical screening criteria" (or TSC).
(iii) What are the 'environmental objectives'?
The Taxonomy Regulation defines these as being:
- climate change mitigation;
- climate change adaptation;
- sustainable use and protection of water and marine resources;
- transition to a circular economy;
- pollution prevention and control; and
- protection and restoration of biodiversity and ecosystems.
(iv) When does the Taxonomy Regulation apply from?
1 January 2022 for provisions in respect of:
- climate change mitigation; and
- climate change adaptation.
1 January 2023 for provisions in respect of:
- sustainable use and protection of water and marine resources;
- transition to a circular economy;
- pollution prevention and control; and
- protection and restoration of biodiversity and ecosystems.
Where do things stand?
(a) Level 1
The Level 1 text of the Taxonomy Regulation was published in the OJ on 22 June 2020 - see above for the dates of its application.
(b) Level 2
(i) What’s already in place?
Following its publication, work started on the underlying Level 2 measures needed to supplement it.
These concern:
- measures to specify the content, methodology and presentation of key performance indicators (KPIs) that non-financial undertakings and asset managers must disclose; and
- establishing TSCs to determine the conditions under which a given economic activity should be considered to be contributing substantially to an environmental objective.
Taking each in turn:
- KPIs
On 10 December 2021, the Commission Delegated Regulation (EU) 2021/2178 (the Disclosures Delegated Act) was published in the OJ.
Its provisions took effect on 1 January 2022.
The Disclosures Delegated Act was amended by the Complementary Delegated Act (EU) 2022/1214 (the CDA), which was published in the OJ on 15 July 2022 and which came into force on 1 January 2023.
The CDA made amendments specifying disclosures to be made in respect of certain nuclear energy and fossil gas activities.
The Disclosures Delegated Act was further amended in June 2023 by the Environmental Delegated Act (see subsection (b) below) to ensure that the disclosure requirements are consistent with the Environmental Delegated Act.
- TSCs
(a) Climate Delegated Act
On 9 December 2021, the Commission Delegated Regulation (EU) 2021/2139 (the Climate Delegated Act) was published in the OJ.
Its provisions took effect on 1 January 2022.
On 15 July 2022, the CDA, was published in the OJ.
This amended the Climate Delegated Act by adding TSC by which certain nuclear energy and fossil gas activities are classified as transitional activities which contribute to climate change mitigation under the Taxonomy Regulation.
Its provisions took effect on 1 January 2023.
On 21 November 2023, Commission Delegated Regulation (EU) 2023/2485 was published in the OJ.
This amended Annex I and Annex II of the Climate Delegated Act, to cover economic activities that make a substantial contribution to the environmental objectives of
- climate change mitigation (Annex I) and
- climate change adaptation (Annex II)
but which had not been previously included in the taxonomy (in particular, manufacturing activities in relation to key components for low carbon transport and electrical
equipment).
Its provisions took effect on 1 January 2024.
(b) Environmental Delegated Regulation
On 21 November 2023, the Environmental Delegated Act (EU) 2023/2486 was published in the OJ.
This
- established Technical Screening Criteria (TSC) for activities that can make a substantial contribution to the environmental objectives for which TSCs are not already available (namely, the environmental objectives of (a) transition to a circular economy, (b) control or protection and restoration of biodiversity, (c) pollution prevention; and (d) the use and protection of water and marine resources) and
- amended the Disclosures Delegated Act, to clarify the disclosure obligations for the additional activities and supplement the requirements in Article 10 of the Disclosures
Delegated Act.
Its provisions took effect on 1 January 2024.
(ii) What’s being developed?
On 26 February 2025, to accompany its Omnibus simplification package on sustainability reporting and due diligence, the European Commission published a legislative proposal to amend:
- the Disclosures Delegated Act
- the Climate Delegated Act and
- the Environmental Delegated Act
with a view to making these measures “simpler and more cost-effective for companies”, by making certain requirements more flexible and reducing the amount of data to be provided – this includes simplification of the KPIs and streamlining the ‘Do No Significant Harm’ (DNSH) criteria.
The proposed amendments were open for consultation until 26 March 2025.
On 4 July 2025, the Commission adopted a legislative proposal for a Delegated Regulation to amend and simplify:
- the content and presentation of information to be disclosed concerning environmentally sustainable activities under Article 8 of the Disclosures Delegated Act and
- certain technical screening criteria (TSC) for determining when economic activities do no significant harm (DNSH) to environmental objectives under the Climate Delegated Act and the Environmental Delegated Act.
The proposal was transmitted to the Council of the EU and to the EP for scrutiny. If neither institution raises objections, the changes will be deemed approved once the four month scrutiny period (extendable by a further two months) ends.
The Delegated Act will apply from 1 January 2026, covering the 2025 financial year. Undertakings are given the option to apply the measures starting with the 2026 financial year if they find this more convenient.
On 7 November 2025, the Commission published a Call for Evidence (available on its webpages for the Climate Delegated Act and the Environmental Delegated Act) with a view to amending these by simplifying the TSC (including the 'DNSH' criteria).
The CfE closes on 5 December 2025 and the Commission expects to adopt new draft delegated regulations in Q2 2026.
(c) Interpretation and guidance
To provide further interpretative and implementation guidance on various legal provisions under the Taxonomy Regulation, the Commission has published the following Notices and other documents.
(a) Disclosures Delegated Act Notices
8 November 2024 - the third Disclosures Delegated Act Notice contains 71 replies to Frequently Asked Questions (FAQs) to assist financial undertakings in how they should report their KPIs in accordance with the Disclosures Delegated Act, made under Article 8(4) of the Taxonomy Regulation.
This had previously been published as a draft Notice on 21 December 2023.
20 October 2023 - the second Disclosures Delegated Act Notice sets out responses to FAQs "on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets".
This had previously been published as a draft Notice along with the draft Climate Delegated Act Notice (see below) on 19 December 2022 - see our client note on the draft Notices here
6 October 2022 - the first Disclosures Delegated Act Notice provides a series of 33 FAQs. These had previously been published in draft form on 2 February 2021 - see our client note here.
(b) Climate Delegated Act Notice
20 October 2023 - the Climate Delegated Act Notice sets out responses to FAQs "on the interpretation and implementation of aspects of the EU Taxonomy Climate Delegated Act, establishing technical screening criteria for economic activities that contribute substantially to climate change mitigation or climate change adaptation and do no significant harm to other environmental objective".
This had previously been published as a draft Notice along with the draft second Disclosures Delegated Act Notice (see above) on 19 December 2022 - see our client note on the draft Notices here
(c) Commission staff documents
The Disclosures Delegated Act and Climate Delegated Act Notices above supplement existing guidance, namely:
a Commission staff document, FAQ: What is the EU Taxonomy Article 8 delegated act and how will it work in practice? (21 April 2021) and
a Commission staff document, FAQs: How should financial and non-financial undertakings report Taxonomy-eligible economic activities and assets in accordance with the Disclosures Delegated Act (20 December 2021; updated in January 2022).
(d) The Taxonomy Regulation and links to the SFDR Notice
12 June 2023 - the Commission Notice contains FAQs aimed at providing clarification on (i) how operators should consider the requirements for compliance with minimum safeguards under the Article 18 of the Taxonomy Regulation and (ii) status of investments in Taxonomy-aligned economic activities and assets under the SFDR - see our report on the Notice here.
Our resources to help you
For our client notes on ESG matters for asset managers, see here.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.
Key contacts
If you have any questions, contact a member of the The Taxonomy Regulation team for assistance:
