The Taxonomy Regulation

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 publication of the Level 1 text, 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 has since been 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. This made amendments specifying disclosures to be made in respect of certain nuclear energy and fossil gas activities.
• the Environmental Delegated Act (see subsection (b) below), which was published in the OJ in November 2023 and which ensured that the Disclosures Delegated Act requirements are consistent with the Environmental Delegated Act and
• the Content Directive (see ‘Changes under the Omnibus package’, below). This was published in the OJ in February 2026 and forms part of the Omnibus I simplification package

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?

(a) Changes under the Omnibus package

On 26 February 2025, to accompany its Omnibus simplification package on sustainability reporting and due diligence, the European Commission published a number of legislative proposals 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.

These proposals included

(i) a Delegated Regulation (the Omnibus Delegated Act)

The Commission’s legislative proposal for a Delegated Regulation (the Omnibus Delegated Act) was intended 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 the subject of a public consultation from 26 February 2025 to 26 March 2025 and formally adopted on 4 July 2025.

After scrutiny by the Council of the EU and the EP, the Omnibus Delegated Act was published in the OJ on 8 January 2026.

It applies 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.

(ii) a Delegated Directive (the Content Directive)

The Commission’s legislative proposal for a Delegated Directive (the Content Directive) was intended to simplify reporting obligations under the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).

Following scrutiny by the Council of the EU and the EP, the Content Directive was published in the Official Journal on 26 February 2026, entering into force on 16 March 2026.

Member States must transpose its provisions into national law by 19 March 2027.

For our client note on the Content Directive, see here.

(b) Commission revisions to the Climate Delegated Act and the Environmental Delegated Act

On 7 November 2025, the Commission published a Call for Evidence (CfE) - available on the Commission’s Climate Delegated Act and Environmental Delegated Act webpages.

For a summary, see our article here

The aim of the CfE was to consider amendments to the Climate Delegated Act and the Environmental Delegated Act by simplifying the TSC (including the ‘DNSH’ criteria).

The CfE closed on 5 December 2025.

On 17 March 2026, the Commission opened two draft Level 2 delegated acts – here and here - for consultation.

These look to amend existing Level 2 RTS under the Taxonomy Regulation, respectively

• the Climate Delegated Act and
• the Environmental Delegated Act

by revising and simplifying TSCs.

The consultation closes on 14 April 2026 and the Commission intends to adopt legislative proposals by the summer.

(c) Commission Call for Technical Advice

On 5 March 2026, the Commission sent a Call for Technical Advice (CTA) to the European Supervisory Authorities (ESAs) to complete the review and simplification of taxonomy reporting under the Disclosures Delegated Act by concentrating on measures that were not addressed in the Omnibus Delegated Act.

The Commission is seeking advice primarily on a number of KPIs in the Disclosures Delegated Act, namely

• the operational expenditure (OpEx) KPI of non-financial firms
• Commissions and Fees KPI and Trading Book KPI of credit institutions and
• the underwriting KPI of insurance/re-insurance undertakings.

The ESAs' final advice is due to be finalised in October 2026. The Commission intends to complete its review of the Disclosures Delegated Act by Q1 2027 and for the new measures to enter into force in Q3 2027.

For our summary of the CTA, see here.

(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.