Amendments to the EU Taxonomy Regulation
30 June 2023
The EU Taxonomy provides the framework for identification of activities which constitute environmentally sustainable economic activity. The EU Taxonomy is intended to be a political tool that is used to direct investments to the economic activities most needed for a green transition.
As part of the sustainable finance package, the European Commission approved in principle a new set of EU Taxonomy criteria for economic activities making a substantial contribution to one or more of the non-climate environmental objectives, namely:
- 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.
These were always intended to follow the entry into force of the technical screening criteria that had been established to support the climate change mitigation and climate change adaptation in 2022. However, this is the first sight of what is likely to form the full version of the Taxonomy. These are contained in the Environmental Delegated Act and amending Disclosures Delegated Act.
In addition, the European Commission has adopted targeted amendments to the EU Taxonomy Climate Delegated Act, which expand on economic activities contributing to climate change mitigation and adaptation not included so far – in particular in the manufacturing and transport sectors. The inclusion of more economic activities covering all six environmental objectives, and consequently more economic sectors and companies, will increase the usability and the potential of the EU Taxonomy in scaling up sustainable investments in the EU.
A summary of these amendments to the economic sectors is set out below.
| Economic Sectors Covered | Existing Economic Activities Under Taxonomy | New Economic Activities Under Taxonomy |
| Disaster Risk Management | -- | Nature-based solutions. Emergency Services, flood risk prevention and protection infrastructure. |
| Buildings | Construction, energy efficiency measures and renovations. | Construction and renovations, demolition and wrecking, maintenance of roads and motorways, use of concrete in civil engineering. |
| Manufacturing | Enabling technologies, heavy industry (transitional). | Plastic packaging goods, electrical and electronic equipment, pharmaceuticals. |
| Energy | Renewables, transmission, specific nuclear and natural gas activities (subject to stringent conditions). | -- |
| ICT and professional activities | Research, data solutions and centres. | Software and consultancy IT/OT (information/operational technologies) data driven solutions |
| Forestry | Afforestation, conservation, forest management, rehabilitation and restoration of forests. | -- |
| Services | -- | Sale of spare parts and second-hand goods. Preparation for re-use of end-of-life products and product components, marketplace for the trade of second-hand goods for reuse. |
| Transport | Low emissions, transitional alternatives until 2025, infrastructures | New transitional water and air transport, automotive and rail components. |
| Water supply and sewerage | Water supply, sewerage, waste management and remediation. | Water supply, urban waste water, sustainable drainage systems (SUDS), phosphorus recovery from waste water. |
The criteria are informed to a very large extent by the recommendations of the Platform on Sustainable Finance, published in March and November 2022. The Commission has also adopted amendments to the EU Taxonomy Disclosures Delegated Act, to clarify the disclosure obligations for the additional activities.
In the background document to the proposals the European Commission also sets out some proposals to help with the usability of the Taxonomy, including the Taxonomy Compass and Taxonomy Navigator.
Importantly they also note that they intend to develop sustainability disclosure requirements for securities not captured under the sustainable finance disclosure regulation. So there are proposals around developing targeted additional information covering non equity ESG securities under the proposal for the Listing Act. This would not impact securities who would already be making disclosures under the Corporate Sustainability Reporting Directive.
