EU Green Taxonomy – evolution from implementation

The European Commission recently published two sets of Frequently Asked Questions (FAQs), to support in the application of the EU Green Taxonomy. This article provides an overview of the FAQs, as well as highlighting those we come across most in discussions with issuers and investors, and providing links to additional implementation resources.

In December 2022, the Commission published two sets of Frequently Asked Questions (FAQs) (in total, covering more than 200 questions) to aid the implementation of the Taxonomy. 

Going forward, the European Commission will continue to focus on enhancing the usability of the EU Taxonomy. We also expect that early 2023 will see additional guidance released, that clarifies certain points around the requirements of the EU Sustainable Finance Disclosure Regulation (SFDR). 

At the end of this article, we have compiled a summary of various other resources that could be useful when considering implementation of the Taxonomy. 

Climate Delegated Act (DA) on Mitigation and Adaptation including Do No Significant Harm (DNSH)

The first set of FAQs explores general (or “horizontal”) questions, as well as questions related to the technical screening criteria, which includes DNSH.

In this note we have aimed to highlight and summarise most of the FAQs, but please do refer to the original FAQ for completeness.

The FAQs have been presented with the question (bold text) and summary answer (plain text):

Horizontal questions, including on process, updates and further development of the Taxonomy

Will the technical screening criteria set out in the Climate DA be made stricter and updated over time? The criteria will become stricter over time to keep alignment with overall policy objectives, technological developments and the availability of scientifically robust evidence.

Will there be more activities contributing to climate change mitigation (CCM) included in the Climate DA? Yes, the Taxonomy will continue to develop over time to include more activities. These may include transition activities as well as activities contributing to the other environmental objectives.

What does checking the compliance with the Technical Screening Criteria (TSC) on the substantial contribution and the DNSH mean in practice? All criteria related to substantial contribution and DNSH, as well as the minimum social safeguards referred to in Article 18 of the Taxonomy Regulation have to be met for an activity to be considered ‘Taxonomy-aligned’. It requires the collection and assessment of relevant information to determine if the economic activity fulfils the conditions set out in the TSC.

How should verification requirements in the technical screening criteria be understood? What documentary evidence could support the demonstration and verification of compliance with those criteria? Where verification is required for activities, the report by the external verifier would constitute the evidence of compliance with those criteria. External verifiers can be either the relevant national competent authorities or an independent third-party verifier; having no conflict of interest with the operator of the activity nor being involved in the development or operation of the activity. Where required, details of the verification of the criteria should form part of the disclosure of Taxonomy-alignment. If verification is not required, it may still be chosen on a voluntary basis to help inform investors of compliance with TSC. Taxonomy-verification requirements are set to evolve together with other sustainability-reporting under the Corporate Sustainability Reporting Directive (CSRD).

Can technical consultancy services be counted as Taxonomy-eligible, and potentially Taxonomy-aligned, if they are related to an activity defined in the Taxonomy Delegated Acts? Only activities that are themselves set out in the Climate Delegated Acts (DA) can be Taxonomy eligible. Thus, only the consultancy services that are explicitly covered by the Taxonomy, in particular with regard to climate change mitigation: in ‘Professional services related to energy performance of buildings’ in Section 9.3; and, with regard to climate change adaptation, in ‘Computer programming, consultancy and related activities’ in Section 8.1; and ‘Engineering activities and related technical consultancy dedicated to adaptation to climate change’ in Section 9.1. In order to determine whether an activity is Taxonomy-eligible, the description of the activity must be used. The references to NACE codes with which such an activity could be associated are used for orientation purposes.

How should greenhouse gas (GHG) emissions for technical screening criteria be calculated (scope, methodologies etc.)? There is no universal calculation method for GHG emissions in the Climate DA. Specific calculation methods are set out in the TSC for specific activities, in line with the methodological approaches based on the requirements laid out in Article 19 of the Taxonomy Regulation.

How can activities that are carried out in jurisdictions outside the EU be assessed for compliance with the TSC, by reference to local third-country requirements or guidelines? When criteria refer to EU/national legislation or standards, should the level of requirements be adapted for criteria to be achieved outside the EU? For assessing the Taxonomy-alignment of an economic activity conducted outside the EU, companies should ascertain whether it is performed in compliance with the requirement applicable in EU legislation or, where mentioned in the TSC, a relevant international standard or equivalent applicable national law in a third country.

How to interpret the use of “and” and “or” in the description of economic activities (for instance in ‘Construction or operation of electricity generation facilities that produce electricity from hydropower’ in Section 4.5; or ‘Construction and operation of electricity generation installations that produce electricity exclusively from biomass, biogas or bioliquids’ in Section 4.8)? The terms ‘and’ and ‘or’ are used interchangeably in the activity descriptions but not in the criteria where ‘and’ refers to a cumulative requirement. In general, an economic activity is Taxonomy-eligible if it constitutes any of the steps referenced in the description of the activity in bringing that activity to market (e.g. construction, operation, refurbishment, installation, maintenance etc.).

How to deal with technical screening criteria that are not relevant to a specific activity mentioned in the description (e.g. a maintenance-only service with no construction-related waste)? If the economic activity does not involve an element addressed by the TSC, an explanation of this fact can be provided in the disclosure of why the activity qualifies as Taxonomy-aligned without fulfilment of a specific criterion (e.g. the provision of a service included in the description which has no impact on other environmental objectives and thereby does not give rise to any potential issues with a DNSH-criterion).

In a number of cases of enabling activities, benchmarks compared to industry averages, peers or best available technologies are required. However, such information is not always available publicly. How should the requirement to provide these benchmarks be met? Where the information required to demonstrate compliance relative to a metric or industry best practice depends on multiple factors or cannot be expressed in a straightforward way, operators should provide appropriate explanations, including any relevant independent third-party opinions, in their disclosures of why the activity is considered to qualify as Taxonomy-aligned.

How does the sustainable finance framework apply to access to private funding for the defence industry? The EU Sustainable Finance Framework focuses on ensuring transparency and does not impose any limitations to the financing of any specific sector, including the defence sector. Like in any sector, undertakings involved in defence-related activities can claim Taxonomy-alignment for eligible horizontal investments stipulated in the Climate DA. This includes, for example, investments in greening their buildings, or investment in clean transport in the form of CapEx and/or OpEx. They can also claim alignment for any other activities identified in the Climate DA (for example activities in the field of transport, data solutions, manufacturing etc.). EU rules on sustainability disclosures apply horizontally across all industries equally and they do not single out a particular sector. There is an explicit reference directly relevant for a limited part of the defence sector in one regulatory technical standard under the SFDR, specifying how financial market participants should disclose information about their principal adverse sustainability impacts (PAIs). This standard covers exposure to four categories of controversial weapons (anti-personnel mines, cluster munitions, chemical weapons, and biological weapons). For the remaining part of the Regulatory Technical Standards (RTS), the requirements (including on social aspects) are the same as for any other sector. Similarly, the rules on MiFID/IDD sustainability preferences for retail investors apply horizontally across all industries equally and do not single out any specific sector. Therefore, they do not prevent investments in any specific sector.

How about companies without any Taxonomy-aligned activities? Will they lose access to finance? No. The fact that a company does not have Taxonomy-aligned activities does not mean that conclusions can be drawn regarding the company’s environmental performance or its ability to access finance. There is also no obligation on companies to have activities aligned with the EU Taxonomy and there is no obligation on investors to invest in Taxonomy-aligned activities. Other disclosures, such as the company’s disclosures under the CSRD will help inform markets about the company’s environmental performance and the company’s direction of travel on environmental matters.

Sector specific questions on technical screening criteria

The following section provides clarification on a number of technical nuances of the Taxonomy technical screening criteria for various types of activities, such as: forestry, manufacturing, energy, water supply, sewerage, waste management and remediation activities, including transport of CO2, transport, construction and real estate activities, information and communication and professional, scientific, and technical activities.

The below highlights a sample of selected FAQs and respective clarifications, which focus on construction and real estate activities: 

Regarding the preparation of construction site waste for recycling (DNSH to circular economy), can it be assumed that compliance with national law and any applicable threshold values is sufficient for a construction activity to be Taxonomy-aligned? The TSC require that the specific threshold for the reuse, recycling, and other material recovery construction and demolition waste applies on the construction site. This means that this threshold has to be reached per specific project and cannot necessarily be considered fulfilled merely by complying with the relevant threshold values in national legislation.

How can non-EU real estate assets be classified as Taxonomy-aligned? How are building standards (Leadership in Energy and Environmental Design (LEED), Building Research Establishment Environmental Assessment Method (BREEAM), DGNB) treated in the EU Taxonomy? Is there any way to demonstrate that a LEED or BREEAM building is Taxonomy-aligned? The [green buildings] standards mentioned are not explicitly considered in the Climate DA. Where they can help demonstrate compliance with the TSC, they can be accepted for the purpose of compliance with the TSC.

As of today, many Energy Performance Certificates (EPC) in some Member States are based on energy consumption rather than energy demand. Can these consumption-based energy certificates be used on an equal basis to prove Taxonomy-alignment? If it is an officially produced EPC, it can be accepted, and used on equal terms.

What are the actual Nearly Zero-Energy Buildings (NZEB) thresholds in each Member State (region)? This information can be obtained from national authorities. Any new building in the EU should have an Energy Performance Certificate (EPC), and the EPC indicates the relevant value for the respective building and how it compares to reference values, such as NZEB.

For residential buildings, can compliance with the technical screening criteria of the activity “Construction of new buildings” in Section 7.1. be demonstrated by using a limited sub-set of apartment units, instead of checking compliance for the whole property? Does this possibility also apply in non-residential buildings? For the energy threshold, this depends on national regulations i.e. if the EPC applies to the whole building, or to each apartment. Whichever is the requirement at national level, it should apply for both residential and non-residential buildings. The correct EPC will be provided in any case, in line with the national regulations. For identical apartments, having normally identical EPCs, a limited sub-set can be used. However, if there are different types of apartments, with different EPCs, all types need to be checked.

Which elements should be provided to prove that the new construction is not built on one of the site types referred to in the criteria for DNSH to biodiversity for the activity “Construction of new buildings” in Section 7.1. (e.g. arable land or high in biodiversity)? On this basis, the building permit can be used as proof of compliance to show that new construction is not built on the land types noted in the DNSH criterion.

For the activity “Renovation of existing buildings” in Section 7.2., what is the definition of major renovation in each Member State? According to Article 2(1)(10) of the Energy Performance of Buildings Directive, “major renovation” means the renovation of a building where: (a) the total cost of the renovation relating to the building envelope or the technical building systems is higher than 25% of the value of the building, excluding the value of the land upon which the building is situated; or (b) more than 25% of the surface of the building envelope undergoes renovation. Member States may choose to apply option (a) or (b), or both. The information can be checked with the Member State concerned.

For the activity “Renovation of existing buildings” in Section 7.2., does the wording ‘is based on a detailed building survey, an energy audit conducted by an accredited independent expert or any other transparent and proportionate method’ mean that to determine the starting Primary Energy Demand (PED) value in addition to an on-site measurement of the PED, alternative methods are acceptable as long as they are ‘transparent and proportionate’? Would it be acceptable to determine (e.g. by using property characteristics and year of construction) upper and lower estimated PED-values for existing energy labels and use the upper PED-values as the starting-PED-value to determine the starting point of a renovation? Where an Energy Performance Certificate (EPC) is not available or cannot be generated, the initial primary energy demand and the estimated improvement can be based on a detailed building survey, an energy audit conducted by an accredited independent expert or any other transparent and proportionate method. The 30% improvement should result from an actual reduction in primary energy demand (where the reductions in net primary energy demand through renewable energy sources are not considered) and can be achieved through a succession of measures within a maximum of three years.

For the activity “Acquisition and ownership of buildings” in Section 7.7., what happens if a building has several Energy Performance Certificates? When a building has several EPCs, the parts of the buildings covered by EPCs that qualify under the technical screening criteria are to be considered Taxonomy-aligned.

For the activity “Acquisition and ownership of buildings” in Section 7.7., to determine when a property was ‘built’, which date should be used: the date a property was actually completed and delivered to the owner / occupier; the date of the application for a construction permit; or the date of the confirmation of completion of a construction permit? For the application of the Taxonomy criteria, the date of the application for a construction permit is relevant.

Can companies use EPC equivalents for assessing alignment with the technical screening criteria of the activity “Acquisition and ownership of buildings” in Section 7.7. in countries where EPC is not offered? In the EU, all Member States have EPCs. However, some Member States may exclude specific types of buildings from EPC schemes e.g. industrial buildings, temporary buildings. Within the EU, whenever an EPC is available for the relevant building considered, it should be used. When this is not possible, equivalents can be used instead. Outside the EU, equivalents can be used instead of the EPCs.

How are buildings assessed in countries where there is no Nearly Zero Energy Buildings threshold, i.e. countries outside the EU? Can companies use equivalents or thresholds from an EU country with a similar climate? Some countries, even outside the EU, have defined NZEB and low energy buildings. Wherever such definitions exist, they can be used. When NZEB are not clearly defined in the national legislation, equivalents can be used, e.g. equivalents or thresholds from an EU country with a similar climate, when possible.

What are the rules for defining the top 15% and top 30% benchmarks of the national market (with a distinction between residential and commercial) as referenced in the technical screening criteria of the activity “Acquisition and ownership of buildings” in Section 7.7? What should be done if there is no Energy Performance Certificate (EPC) nor any data to determine whether a building belongs to the best 15% of the national building stock? In the absence of a relevant EPC, a technical study can be done to estimate the relevant threshold for the top 15% of the national (or regional) building stock for that category of building. There may be information available from national databases or studies produced by certain organisations (e.g. World Green Building Council). Whenever there is such a study publicly available, it can be used. When there is no study available, it has to be conducted. It can be expected that e.g. interested market actors or associations / institutes / public authorities could be willing to conduct or commission such studies and make them public, so that other entities (in particular smaller ones) could use them afterwards. The EPC remains the simplest option, in the EU, as it can easily be obtained for most buildings, and it is also  mandatory when a building is sold.

What should be done if it is currently not possible to quantitatively name the top 15% of the building stock before 31.12.2020, and there is no corresponding national evaluation of the Energy Performance Certificates already issued, and there is no valid data based on the operating energy demand of the existing building stock? As a first simplification, can calculated energy efficiency data (e.g. from energy performance certificates with standardised energy requirements for household electricity / operating electricity) be used as opposed to real consumption data (from buildings in operation) to determine Taxonomy-alignment with the substantial contribution criteria of the activity “Acquisition and ownership of buildings” in Section 7.7? In order to use the option of demonstrating that the building is within the top 15% of the national or regional building stock, adequate evidence should be provided (e.g. a recent study), which at least compares the performance of the relevant asset to the performance of the national or regional stock built before 31 December 2020 and at least distinguishes between residential and non-residential buildings. If such data is not available, a study can be conducted to perform such an assessment. Alternatively, the option of an EPC class A can be used. There is no requirement to conduct the assessment based on real consumption data for demonstrating that a building is within the top 15% of the building stock. In fact, it is recommended to use estimated energy consumption, which better reflects the energy performance of the building (being less influenced by occupancy and behaviour patterns). Only for large non-residential buildings (with an effective rated output for heating systems, systems for combined space heating and ventilation, air-conditioning systems or systems for combined air-conditioning and ventilation of over 290 kW), is it required to show that the building is also efficiently operated through energy performance monitoring and assessment.

The top 15% is a dynamic metric. Is grandfathering guaranteed for properties, e.g. over the entire term of a green bond, if they were among the top 15% at the time of issue? There is no grandfathering of the technical screening criteria themselves. If the criteria are revised and changed, or an activity falls out of compliance with criteria that are dynamic, a new assessment of (and where relevant effort to ensure) compliance is needed, as of the date when the criteria apply. This is distinct from the grandfathering of financial instruments or transactions on the basis of the criteria at the time of issuance or conclusion of a loan, where separate rules apply (see for instance Article 7(5) of the Disclosures Delegated Act which allows financial undertakings to report financed Taxonomy-aligned activities as such for up to five years after the application of revised criteria / changed coverage of criteria).

Does Section 7.7 (“Acquisition and ownership of buildings”) differentiate the eligibility of the revenues derived from the ownership of the building (meeting technical screening criteria) depending on the type of economic activity being carried out? For example, in the case of airport buildings and terminals meeting the technical screening criteria under Section 7.7, can the revenues derived from the building ownership be covered regardless of their nature e.g. rents from duty-free shops or rents from ground handlers operations in the terminal? Activities detailed within the framework of Section 7.7 do not define the type of revenues derived from the building ownership that can be eligible or not. However, only revenues derived from the ownership of the building, e.g. rents, can be considered regardless of the activities that take place in a building (duty-free shops, ground handlers operations). Other non-related revenues, e.g. revenues that are not derived from the ownership of the building, but directly from aeronautical activities carried out by the airport operator cannot be considered and are not covered by this activity. For instance, the rents for the occupation of the building paid by duty-free shops are eligible, but not the revenues generated by duty-free shops from the sale of products to consumers.

Questions on recurring DNSH criteria

The following section provides clarifications on DNSH requirements specified in separate appendices of the Climate DA. Appendix A: Generic criteria for DNSH to climate change adaptation. Appendix C: Generic criteria for DNSH to pollution prevention and control regarding use and presence of chemicals. Appendix D: Generic criteria for DNSH to protection and restoration of biodiversity and ecosystems). Only selected FAQs have been highlighted.

Generic criteria for DNSH to climate change adaptation

What is the difference between the technical screening criteria for substantial contribution to climate change adaptation set out in Annex II and the technical screening criteria for DNSH to climate change adaptation set out in Annex I (climate change mitigation)? The DNSH criteria for climate change adaptation, which are included in Annex I to the Climate DA, cover a part of the substantial contribution criteria for climate change adaptation, i.e. a risk and vulnerability assessment must be carried out to identify adaptation solutions. However, the substantial contribution criteria for climate change adaptation as included in Annex II to the Climate DA, add the requirement to implement the identified adaptation solutions.

With the submission of the 6th Intergovernmental Panel on Climate Change (IPCC) Assessment Report, the IPCC presented new climate scenarios. Are these to be considered instead of the existing scenarios cited in the EU Taxonomy? Criterion 3 of the substantial contribution criteria to climate change adaptation specifies that “climate projections and assessment of impacts are based on best practice and available guidance and take into account the state-of-the-art science for vulnerability and risk analysis and related methodologies in line with the most recent Intergovernmental Panel on Climate Change reports”. Therefore, users should refer to the most recent IPCC Assessment Reports once they become available.

How does proportionality influence the scope of the robust climate risk and vulnerability assessment that has to be conducted as part of the DNSH climate change adaptation criteria? The objective of the robust climate risk and vulnerability assessment is to identify significant physical climate risks to the performance of the economic activity. The climate risk and vulnerability assessment carried out should follow state-of-the-art methodology and consider the most recent highest-resolution data available. The scope of the assessment, methods and data used to achieve this objective may vary to maintain proportionality. For example, in many cases it may be enough to use a pessimistic scenario, such as Representative Concentration Pathway (RCP) 8.5, and not consider all four RCP scenarios, provided that the consideration of additional scenarios is unlikely to yield new insights relevant for the risk assessment. The depth of the assessment may also vary, as long as it is sufficient to identify the physical climate risks that are material to the activity. For example, the extent to which risks may exist in the supply chain or in upstream production processes and whether these aspects need to be considered in the assessment can be weighed up individually for each activity. Decisive factors for the proportionality of the selected assessment approach can be the size of the company, the type, scale and context of the activity, the business model or the position in the supply chain. For example, replacing windows in an office building to improve energy efficiency requires a less detailed climate risk assessment than building a dam to generate hydropower. The frequency of the climate risk and vulnerability assessment should also be proportionate to its objectives. Appropriate occasions for updates of the assessment and the resulting adaptation plan are changes that increase the exposure to the identified risks or that may pose new risks or significantly alter already identified risks to the performance of the economic activity, such as changes in: the assessed economic activity, e.g. new suppliers or new production facilities; the climate data basis of the assessment, e.g. unforeseen changes in climatic systems, changes in assumptions for climate models, or technological advances in climate modelling.

What documentation must be provided to meet DNSH requirements related to climate change adaptation? To meet the requirements for DNSH to climate change adaptation for an economic activity for the purpose of the EU Taxonomy, it is essential to present a coherent adaptation plan if climate risks have been identified. The measures included in the plan should have been systematically assessed for their suitability to reduce the most important physical climate risks for the activity while meeting additional requirements outlined in the Climate DA. The adaptation plan should also include a timetable for implementing the measures and a documentation of measures already implemented. Adaptation measures have to be implemented for new assets at the time of completion and for existing assets within five years of the identification of the associated climate risks. The most important physical climate risks have to be identified using a robust, comprehensible, and proportionate climate risk and vulnerability assessment.

What is meant by ‘state-of-the-art climate projections’ referred to in the substantial contribution criteria to climate change adaptation? Latest projections taking into account the evolving scientific knowledge (e.g. on tipping points).

Generic criteria for DNSH to protection and restoration of biodiversity and ecosystems

Environmental impact assessments (EIAs) are not always required by national law. If the EIA is not required by EU law, is waiving the EIA then harmless for the assessment of Taxonomy-alignment? Not all activities are subject to a mandatory EIA in accordance with EU law. Nevertheless, for an economic activity to align with a DNSH criteria, the activity has to fulfil both of the following conditions: 1) An Environmental Impact Assessment or screening has been completed and the required mitigation and compensation measures implemented and; 2) An appropriate assessment within the meaning of Art. 6(3) of the Habitat Directive 92/43/EEC has been conducted, where applicable, for sites/operations located in or near biodiversity sensitive areas, and the mitigation measures implemented. Therefore, there is no need for an EIA in every case. The requirement in the criteria is to go through the process to determine whether there is need for an EIA – “An Environmental Impact Assessment (EIA) or screening has been completed in accordance with Directive 2011/92/EU”. If the screening has been done and the conclusion is that no EIA is needed, this part of the requirement is met. As regards the approach outside of the EU, this is spelled out in footnote 334 of Appendix D: “For activities in third countries, in accordance with equivalent applicable national law or international standards requiring the completion of an EIA or screening, for example, IFC Performance Standard 1: Assessment and Management of Environmental and Social Risks.”

What does “for sites / operations located in or near biodiversity-sensitive areas” mean in practice? This applies either to activities that would take place within such areas, or activities that are likely to have a significant impact on such areas (hence the “or near”). It was not considered feasible to define a kilometre radius for “or near”, as this will vary from site to site (e.g. a dam on a river many kilometres downstream could affect the migration of protected fish species such as salmon in a Natura 2000 area upstream). In other words, where there is a likelihood of a significant risk to such area or site (i.e. that would hamper the conservation objectives for the site) from a development within or outside the site, this needs to be assessed by way of an appropriate assessment, prior to any development consent. In the EU, this is in line with EU Bird and Habitats Directives 2009 / 147 / EC and 92 / 43 / EEC. The approach for countries outside of the EU is spelled out in footnote 335 of Appendix D.

Some DNSH criteria seem to be company strategies or plans, rather than activity specific criteria. Is it enough to comply on company level or does it need to be broken down per activity or product level? Yes, compliance at company level is sufficient in those cases where information at the level of the undertaking is sufficient to determine whether alignment is achieved at the activity-level.

“Article 8”

“Article 8” DA on rules for financial and non-financial companies in the scope of the Non-Financial Reporting Directive (NFRD) (and later – Corporate Sustainability Reporting Directive (CSRD)) which are required to report on the EU Taxonomy-eligibility & alignment of their activities and assets

This set of FAQ provides clarification regarding reporting requirements under the EU Taxonomy. Responses are aiming to address the following (usually very technical) questions. For the responses we encourage you to read the original text.

Section I – General

  • What is the envisioned timeline for the application of Taxonomy-related disclosures set out in the Complementary Delegated Act (CDA) [that includes nuclear and natural gas related activities as transitional activities under the EU Taxonomy]?
  • What is the envisioned approach for Taxonomy-related reporting in relation to the [non-climate related] environmental objectives?
  • What is the impact of the CSRD on the scope of the reporting entities under the Disclosures Delegated Act?
  • When and how should the Taxonomy disclosures be verified by external reviewers? How will this change with the application of CSRD?
  • Are undertakings established in EEA-countries obliged to report the Taxonomy alignment of their economic activities?
  • How can entities ensure that their voluntary reporting of Taxonomy-alignment of their economic activities does not contradict or misrepresent mandatory disclosures set out in the Disclosures Delegated Act?
  • How are reporting undertakings expected to disclose comparative information in the disclosures under the Disclosures Delegated Act?
  • How should reporting undertakings address ‘double-counting’ in the context of business activities contributing to multiple environmental objectives?
  • What should be the level of consolidation of Key Performance Indicators (KPIs) of a parent undertaking with respect to (i) their third country subsidiaries and (ii) their activities / assets in third countries, or those of their EU subsidiaries? Where should KPIs be disclosed?
  • What is the level of consolidation of KPIs of non-EU groups with a NFRD subsidiary in the EU?
  • Can a subsidiary falling within scope of the NFRD / CSRD be exempted from making Taxonomy related disclosures if its parent undertaking discloses Taxonomy-related information at consolidated level where required or on a voluntary basis?
  • Where a reporting undertaking is required to provide consolidated KPIs, should it also provide KPIs of its subsidiaries?
  • Is there any minimum turnover, CapEx and OpEx threshold below which undertakings are not obliged to report Taxonomy-eligibility or alignment of their economic activities (‘materiality thresholds’)?
  • How should turnover, CapEx, OpEx of joint ventures be treated for the reporting of Taxonomy-related KPIs?
  • How should reporting undertakings account for hedging instruments (including forward sales of power)?
  • How should the KPIs be adjusted by non-financial undertakings to take account of the environmentally sustainable bonds that they issued with the view of avoiding ‘double-counting’? How should environmentally sustainable bonds / debt securities and the linked double counting issues be treated?
  • How should a ‘reporting undertaking’ treat the turnover and CapEx from disposal groups and discontinued operations and in the context of IFRS 5?
  • How should reporting undertakings assess the Taxonomy-eligibility of economic activities for climate change adaptation (CCA) under Article 11(1)(a) of the Taxonomy Regulation?
  • What is the Taxonomy-aligned share of turnover and corresponding CapEx / OpEx from activities listed in Annex II to the Climate Delegated Act?

Section II - Turnover KPI

  • When should an undertaking be required to report under the Disclosures Delegated Act an economic activity that has not been performed by the reporting entity itself but by a subcontractor?
  • How should reporting undertakings disclose turnover from Taxonomy-aligned economic activities whose output is used or consumed internally?
  • How should reporting undertakings allocate the turnover to economic activities which provide multiple services or products to customers?

Section III - CapEx KPI

  • How should reporting undertakings treat public funding and subsidies received to finance their CapEx?
  • At what point in time does the five-to-ten-year period of the CapEx plan commence for non-financial undertakings for the purposes of reporting? Does this time period apply both to a plan to expand a Taxonomy-aligned economic activity as well as to upgrade a Taxonomy-eligible economic activity into a Taxonomy-aligned economic activity?
  • What is the beginning of the 18 month-period for the completion of individual measures referred to in point (c) of Section of Annex I?
  • How comprehensive and precise should a CapEx plan be to be counted in the numerator of the CapEx KPI? Would the expansion of an existing Taxonomy-aligned economic activity in the same facility count as CapEx under point (a) or (b) of Section of Annex I?
  • How should the Taxonomy-aligned value of CapEx be presented on points (a), (b) and (c) of Section of Annex I?
  • What is the scope of the CapEx and OpEx referred to in points (c) of Section and Section of Annex I, i.e. purchase of Taxonomy-aligned output and individual measures?
  • How should CapEx and OpEx integrated in value chains be disclosed in the situation where the reporting undertaking is performing both the upstream and the downstream Taxonomy-eligible economic activity?
  • How should CapEx be assessed with regard to Taxonomy-alignment if the asset that the CapEx is financing might be used for various projects?
  • Can prepayments be counted as part of Taxonomy-aligned CapEx?

Section IV - OpEx KPI

  • How should research and development be accounted in the numerator of the OpEX KPI where it cannot be linked to specific activities?
  • How should OpEx categories referred to in points (a) to (c) in Section of Annex I (OpEx Numerator) be understood and treated in the numerator and denominator of the OpEx KPI?
  • To which elements of the definition of the denominator of OpEx KPI does the notion of “maintenance and repair, and any other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment” refer under Section of Annex I?

Links and references to additional EU Taxonomy guidance

EU taxonomy for sustainable activities

Provided by the European Commission. The resources include official documents, guidance, tools from the European Commission, including previous FAQ

Report on Data and usability of the EU Taxonomy

Provided by the EU Platform on Sustainable Finance. The report includes recommendations on Data and Usability as part of Taxonomy reporting.

Report on Minimum safeguards

Provided by the EU Platform on Sustainable Finance. The report advises on the application of minimum safeguards (MS) in relation to the Taxonomy Regulation Articles 3 and 18.

Implementing the EU Taxonomy

Provided by the UN Principles for Responsible Investment (PRI). The resource includes an update to the PRI’s ‘Testing the Taxonomy’ report.

Practical approaches to applying the EU Taxonomy to bank lending

Provided by the United Nations Environment Programme Finance Initiative (UNEP-FI) / European Banking Federation (EBF). The resource provides practical approaches to applying the EU Taxonomy to bank lending (follows a joint project in 2020 that tested the application of the EU Taxonomy to core banking products). 

EU Taxonomy Alignment in Listed Real Estate

Provided by the European Public Real Estate Association (EPRA). A practical guide to determining if ‘Listed Real Estate’ activities are environmentally sustainable as per the criteria of the EU Taxonomy.

DNSH Handbook

Provided by Funds & Investment Management Maples Group; ELS Europe; Frankfurt School - UNEP Collaborating Centre for Climate & Sustainable Energy Finance. The guide focuses on the DNSH principles and technical screening criteria of the EU Taxonomy and how they may be implemented and disclosed in practice. 

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