EU Taxonomy Regulation Requirements

Article 3 of Regulation (EU) 2020/852 is the central alignment test. An economic activity qualifies as environmentally sustainable only when it contributes substantially to at least one of the six environmental objectives, does not significantly harm the other objectives, is carried out in compliance with Article 18 minimum safeguards, and meets the applicable technical screening criteria.

The six objectives are climate change mitigation, climate change adaptation, 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. Teams should keep the objective selection separate from the activity mapping, because the same business line may contain eligible, non-eligible, aligned, and non-aligned activity portions.

Eligibility is a coverage test. Under the Disclosures Delegated Act, a Taxonomy-eligible economic activity is one that is described in delegated acts adopted under Articles 10 to 15 of the Taxonomy Regulation, regardless of whether it meets the technical screening criteria.

Alignment is a performance and safeguards test. The same delegated act defines a Taxonomy-aligned economic activity as one that complies with Article 3 of the Taxonomy Regulation. The Commission notice on the Climate Delegated Act also states that substantial contribution criteria, DNSH criteria, and Article 18 minimum safeguards all have to be met for an activity to be considered Taxonomy-aligned.

Article 8 of the Taxonomy Regulation requires undertakings that are subject to the relevant non-financial reporting rules to disclose how and to what extent their activities are associated with environmentally sustainable economic activities. The Disclosures Delegated Act then specifies content, presentation, methodology, and templates.

For non-financial undertakings, the core KPIs are the proportion of turnover, capital expenditure, and operating expenditure associated with Taxonomy-aligned economic activities. Financial undertakings use sector-specific KPIs. For example, the Disclosures Delegated Act identifies the Green Asset Ratio as the main KPI for credit institutions and provides dedicated templates for asset managers, credit institutions, investment firms, and insurance and reinsurance undertakings.

A useful EU Taxonomy evidence file should let a reviewer move from the delegated-act activity description to the internal fact pattern and then to the KPI line item. It should show why the activity is eligible, which environmental objective is used for substantial contribution, how each DNSH criterion was tested, and how minimum safeguards were assessed.

Commission guidance says checking technical screening criteria requires collecting and assessing relevant information. Where the Climate Delegated Act requires verification for certain activities, the external verifier report constitutes evidence of compliance with those criteria.

The most common failure pattern is collapsing several separate requirements into one label. A page, report, or dashboard may say an activity is sustainable even though the evidence only proves that the activity is eligible, or it may calculate a KPI without preserving the DNSH and minimum-safeguards evidence that supports the aligned numerator.

Another risk is stale criteria. The Taxonomy Regulation requires the Commission to review technical screening criteria regularly, and Commission guidance notes that criteria may become stricter over time. Prior-year conclusions should therefore be treated as reusable evidence only after an amendment check.

Create one maintained requirements register for the reporting year. Each row should hold the entity, activity, delegated-act source, eligibility decision, alignment decision, KPI output, evidence owner, reviewer, and source version. This keeps Article 8 disclosure work connected to the underlying legal tests.

Use the Commission portal and delegated-acts page to monitor current delegated acts and notices, but do not update public Taxonomy claims until the affected activities, criteria, and KPI templates have been rechecked.