As part of the EU’s widespread efforts to simplify sustainability regulations, we’ve seen many landmark sustainability laws revisited. Among these is the EU Taxonomy, a law designed to classify sustainable economic activities and direct investment toward them. The European Commission is now looking to limit the Taxonomy’s application to material activities. By exempting non-material activity, the EC hopes to reduce the regulatory burden. A press release from the EC summarizes the exemption rules:
“Financial and non-financial companies are exempt from assessing Taxonomy-eligibility and alignment for economic activities that are not financially material for their business. For non-financial companies, activities are considered non-material if they account for less than 10% of a company’s total revenue, capital expenditure (CapEx) or operational expenditure (OpEx)… Non-financial companies are exempt from assessing Taxonomy alignment for their entire operational expenditure when it is considered non-material for their business model”
In addition to these changes, the Commission is simplifying how financial firms report Taxonomy Key Performance Indicators (KPIs). Reporting under the Taxonomy regulation will also be substantially reduced, and the number of required data points will fall by 64% for non-financial companies and 89% for financial companies. The Commission is enacting these changes through a delegated act, meaning that Parliament and the Council will have a scrutiny period of four months to review the changes. However, delegated acts don’t require trialogues or lengthy debate, so the changes can be expected to go into effect once the scrutiny period is over. The measures will apply January 1, 2026, and cover the 2025 financial reporting period.
Our members can learn more about sustainable finance here.
DID YOU KNOW … we are much more than just blogs. PracticalESG provides tools and guidance for in house staff and outside advisors – from beginners to senior practitioners. We scour third party resources, vetting and filtering them – saving you hours of your day. And we don’t use AI to produce any content or have annoying ads.
If you’re not already a member, sign up now and take advantage of our no-risk “100-Day Promise” – during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. But it will probably pay for itself before then.
Are you a client of one of our Partners – SourceIntelligence, Kumi, Ecolumix, Elm Consulting Group International or Impakt IQ? Contact them for exclusive pricing packages for PracticalESG.
Practical Guidance for Companies, Curated for Clarity.
