ESG: Simplifying the EU taxonomy – the Platform reports

On 5 February 2025, the Platform on Sustainable Finance (the Platform) - an advisory body to the European Commission - published a report, "Simplifying the EU Taxonomy to Foster Sustainable Finance" (the Report).

(The Platform also recently separately consulted on the proposed categorisation of products under SFDR - see our summary here.)

In order to simplify taxonomy reporting, the Report sets out four key proposals to the Commission which, it estimates, would together contribute to reducing the reporting burden on non-financial companies by over a third.

The Platform also considers that using estimates and proxies, along with a streamlined 'do no significant harm' (DNSH) assessment process, is "essential for rapidly and significantly reducing the reporting burden on financial companies".

In addition, both financial and non-financial companies would benefit from the introduction of a materiality approach, further enhancing proportionality and efficiency in reporting.

The Platform's Proposals

A. Reducing the corporate reporting burden by more than one-third by

• making the Operational expenditure (OpEx) key performance indicator (KPI) voluntary disclosure, except for R&D costs (for which the KPI would remain mandatory)

• introducing a materiality threshold for calculating KPIs in all non-financial company reporting, , based on cumulative exposure, rather than the level of individual economic activities

• enhancing alignment with financial reporting

• simplifying reporting templates, with a clear reduction of data points so reporting is limited to information that is relevant for making business decisions.

B. A simplified Green Asset Ratio (GAR) that encourages green and transition lending:

• ensuring a symmetrical GAR with similar numerator and denominator composition

• simplifying retail exposure reporting, which focuses on substantial contribution

• allowing estimates and proxies in reporting, in conjunction with safe harbours to protect against greenwashing allegations

C. A practical approach to DNSH criteria

• a lighter compliance assessment process would be introduced

• all DNSH criteria would be subject to review as various delegated acts are reviewed, with the priority being on their usability and practicality for financial and non-financial companies

• as a temporary measure, a "comply or explain" approach would be introduced for DNSH assessment of the Turnover KPI.

D. Helping small and medium-sized enterprises (SMEs) access sustainable finance by adopting

• a streamlined, voluntary approach for banks and investors' exposures to unlisted SMEs

• a simplified approach to the Taxonomy for listed SMEs.