EU Taxonomy Regulation Eligibility vs alignment

Eligibility maps the undertaking's activity, exposure, asset, product, or service to an activity described in the Taxonomy delegated acts.

Alignment starts from that mapped activity and tests whether it qualifies as environmentally sustainable under Article 3 and the applicable activity criteria.

Keep one record for the activity mapping and a second record for the alignment result; an eligible activity can remain eligible even when the alignment test fails or is incomplete.

Eligibility usually needs the sustainability, finance, and business owner who can identify the activity description, reporting boundary, and KPI line affected.

Alignment also needs the technical owner who can evidence screening criteria, DNSH, minimum safeguards, and any activity-specific calculations.

Do not leave alignment to the reporting team alone; they need source evidence from business, finance, legal, environmental, human-rights, and technical control owners where those facts are relevant.

Eligibility is triggered when an in-scope undertaking prepares Article 8 disclosure and must classify activities, assets, or exposures as Taxonomy-eligible or non-eligible.

Alignment is triggered when the undertaking wants to report or describe the eligible activity as Taxonomy-aligned or environmentally sustainable.

Classify first; then run the alignment test only for activity-exposure combinations where the delegated-act mapping and data are specific enough to support the test.

Eligibility test: is the economic activity described in the relevant Taxonomy delegated act for the objective and reporting period being assessed?

Alignment test: does that eligible activity make a substantial contribution, avoid significant harm to other objectives, meet minimum safeguards, and satisfy technical screening criteria?

A yes on eligibility is only permission to assess and disclose coverage; it is not a yes on the environmental sustainability of the activity.

Eligibility evidence is the activity mapping: delegated-act activity description, internal activity or exposure, reporting boundary, and KPI amount included or excluded.

Alignment evidence is the test file: technical screening criteria, substantial contribution calculation, DNSH evidence, minimum safeguards conclusion, and allocation method where only part of an amount is aligned.

Store eligibility and alignment evidence separately enough that reviewers can see why an amount moved from non-eligible to eligible, or from eligible to aligned.

Eligibility classification appears in Article 8 reporting when the undertaking discloses eligible and non-eligible activity or exposure proportions for the reporting period.

Alignment is disclosed only when the applicable Article 8 timetable and KPI methodology require or allow aligned activity reporting for the undertaking type and activity set.

Avoid reusing first-year eligibility conclusions as current alignment evidence; confirm the current delegated acts, reporting templates, and KPI methodology before publication.

The main eligibility risk is over-scoping or under-scoping the activity list, which can distort eligible and non-eligible KPI amounts.

The main alignment risk is overstating sustainability by reporting aligned amounts without the Article 3 and technical-screening evidence.

Treat unsupported alignment wording as a disclosure-control issue, not just an editorial issue, because Article 8 disclosures are designed to inform investors and the public.

Eligibility and alignment can reuse the same activity inventory, entity boundary, KPI base data, and delegated-act source citation.

Alignment cannot reuse eligibility alone; it needs the criteria-level evidence and any methodology used to allocate amounts to aligned activities.

Build the evidence workflow so the eligibility inventory feeds the alignment test, but make the aligned KPI numerator depend on completed criteria evidence.

Call it eligible only when the activity is described in the relevant Taxonomy delegated act and the KPI or exposure treatment is documented.

Call it aligned only when the eligible activity also passes Article 3, the technical screening criteria, DNSH, and minimum-safeguards checks with retained evidence.

Use three visible states in Taxonomy reporting workpapers: non-eligible, eligible not aligned, and aligned. This prevents the most damaging shortcut: treating coverage as proof of environmental sustainability.