European Commission adopts delegated act simplifying EU Taxonomy reporting

In what marks the latest step on the EU’s road to sustainability reporting simplification, on 4 July 2025, the European Commission (“EC”) adopted a Delegated Act amending the currently in-force Taxonomy Disclosure, Climate and Environmental Delegated Acts (the “Delegated Act”).

Background

The EC published a draft version of the Delegated Act in February 2025 as part of its first Omnibus simplification package, which you can read more about here. A public consultation period followed, during which the EC sought feedback on (among other things) simplifying the do no significant harm (“DNSH”) criteria and reducing the number of data points included in the Taxonomy reporting templates.

Simplification measures

The Delegated Act contains the following main simplification measures:

• Exempting non-financial undertakings from assessing (i) Taxonomy-eligibility and alignment for economic activities that are not financially material for their business and (ii) Taxonomy alignment for their entire OpEx when considered non-material for their specific business model.

For non-financial undertakings, activities will be deemed non-material if they account for less than 10% of total revenue, CapEx or OpEx. If activities fall cumulatively below this 10% figure, such undertakings can choose whether to assess if those activities are eligible under, or aligned with, the Taxonomy criteria.

The assessment of materiality of economic activities should be made for each key performance indicator (“KPI”) independently. That means an activity could be non-material for the turnover KPI whilst also generating material CapEx. In such an event, the undertaking may decide to not assess its existing economic activity that generates non-material turnover, but to include the activity in its assessment of CapEx.

In the reporting templates, non-financial undertakings must separately report the proportion of turnover, CapEx or OpEx that was not assessed as a result of being considered non-material.

In addition, non-financial undertakings have the option to not assess Taxonomy eligibility and alignment for their total OpEx if it is not material for their specific business model. In such cases, non-financial undertakings can choose not to report their OpEx KPI and can instead only provide the total value of their OpEx alongside an explanation of why their OpEx is not material for their business models.

• Exempting financial undertakings from assessing (i) Taxonomy-eligibility and alignment for economic activities that are not financially material for their business and (ii) Taxonomy alignment for their entire OpEx when considered non-material for their business

For financial undertakings, activities will be deemed as non-material if they account for less than 10% of loans and investments financing specific activities whose use of proceeds is known. However, this does not apply to exposures for which the use of proceeds of the borrower or investee is not known (such as general purpose loans or investments in equity). For assessing such exposures, financial undertakings rely directly on the Taxonomy KPIs reported by the entities they invest or lend to, including the information concerning non-material activities they report.

Non-material assets must be reported separately as non-material exposures in the reporting templates.

In addition, financial undertakings that are subject to several KPIs (e.g. green asset ratio (“GAR”) on stock and flow, financial guarantees, AuM, fees and commissions KPIs) are given the option not to report KPIs that capture financial activities and assets that are not material for their business. In particular, if the financial activities and assets captured by a given KPI generate less than 10% of net turnover, the undertaking may decide not to report that KPI.

• Granting financial undertakings the option of not reporting detailed Taxonomy KPIs for two years.

Until 31 December 2027, financial undertakings can opt-out of reporting detailed Taxonomy information and KPIs, provided they do not claim that their activities are associated with Taxonomy-aligned activities. If they opt-out, financial undertakings must publish a statement to this effect in their management reports.

• Cutting the number of data points by 64% for non-financial companies and by 89% for financial companies.

The reporting templates have been adjusted to provide transparency on the proportion in the denominator of the KPIs of the activities or exposures that are not assessed for Taxonomy-eligibility and alignment. For non-financial undertakings, one data point per KPI has been added for activities considered as non-material.

The templates for financial undertakings have also been adjusted to reflect that (i) exposures to undertakings that are not subject to reporting under the Corporate Sustainability Reporting Directive (“CSRD”) as well as exposures to derivatives, cash, cash equivalents, goodwill and commodities have been excluded from the denominator of KPIs.

Furthermore, the separate reporting templates on the performance and exposures to fossil gas and nuclear activities have been deleted. Non-financial undertakings will report on those activities, if material, only in the ‘per activity' template in the same way as for any other material activities, whilst financial undertakings will report on those activities, if material, in an aggregated form in their standard template.

• Simplifying the DNSH criteria in relation to pollution prevention and control related to the use and presence of chemicals.

The Delegated Act specifies the application of exemptions relating to the uses of certain hazardous substances in electrical and electronic equipment and to the use of substances that deplete the ozone layer authorised under the Directive on Restriction of Hazardous Substances in Electrical and Electronic Equipment and the Regulation on substances that deplete the ozone layer, in clearly specified cases.

Moreover, the provision concerning substances that have been self-classified according to the Classification, Labelling and Packaging Regulation has been removed.

The EC is also launching a review of all the existing EU Taxonomy screening criteria, with the objective of updating, simplifying and enhancing their usability.

Timing

The measures laid out in the Delegated Act will apply from 1 January 2026 and will cover the 2025 financial year. However, undertakings have the option to apply the previous rules for this reporting cycle.

Next steps

The Delegated Act will now be transmitted to the European Parliament and the Council of the EU for their review. Following a review period of four months, which can be prolonged by an additional two months, the Delegated Act will be published in the Official Journal of the EU. It will enter into force 20 days following publication.