• Streamlining Reporting: Recommendations focus on simplifying the “do no significant harm” (DNSH) assessment and clarifying KPI calculations.
• Enhancing Data Access: Clear guidelines for estimates, safe harbors for financial reporting, and expanded use of proxies.
• Supporting SMEs: Voluntary and simplified approaches proposed for small businesses, banks, and investors.

The Platform on Sustainable Finance has published a report outlining evidence-based recommendations to simplify and enhance EU taxonomy reporting. The advisory body, responding to the European Commission’s mandate, aims to make sustainability disclosures more effective and accessible.

Related Article: EU Platform on Sustainable Finance Proposes Key Updates to EU Taxonomy

Key recommendations include:

• Refining DNSH assessment by differentiating requirements based on entity type (financial vs. non-financial), usage (turnover vs. capital expenditure), and geography (EU vs. non-EU exposure).
• Introducing materiality principles for all entities, setting thresholds for key performance indicators (KPIs), and simplifying DNSH assessment for turnover KPIs.
• Clarifying KPI calculations related to operational expenditures (OpEx), limiting mandatory scope to research and development (R&D).
• Establishing clear guidelines for estimates within the taxonomy framework and providing safe harbors for financial sector reporting.
• Expanding the use of proxies and estimates for assets under the green asset ratio (GAR) and green investment ratio (GIR), while simplifying retail assessments.
• Developing voluntary, simplified approaches for SMEs, banks, and investors to integrate the taxonomy into their disclosures.

The report builds on previous work, including the 2022 recommendations on data and usability and the 2024 compendium of market practices, ensuring that the taxonomy remains practical and aligned with market needs.

The European Commission is expected to review and consider these recommendations to improve regulatory coherence and facilitate sustainable finance adoption.

Read the full report here.

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