About
The EU Taxonomy Regulation entered into force in the EU in July 2020 and has been applicable from 1 January 2022. It entered into force in Norway 1 January 2023. The Taxonomy Regulation constitutes a framework intended to clearly define which economic activities can be considered "environmentally sustainable", and thereby limit greenwashing. Greenwashing may be defined as a practice where sustainability-related statements etc. do not clearly and fairly reflect the underlying sustainability profile of an entity, product or service, which in turn may be misleading to consumers, investors, or other market participants.
Further to the objective of increased transparency, the EU Taxonomy Regulation also imposes direct reporting and disclosure requirements related to the "taxonomy performance" of certain businesses and financial products:
- The regulation sets out reporting requirements for undertakings subject to sustainability reporting under the CSRD:
The EU Taxonomy Regulation refers to the Accounting Directive (as amended by the CSRD) when determining the scope of undertakings subject to reporting requirements. This means that there currently is a 1:1 relationship between entities reporting under the Taxonomy and the CSRD. As part of its Omnibus simplification package announced on 26 February 2025, the Commission proposed to limit the scope of reporting entities to entities subject to CSRD that also have an annual net turnover of more than EUR 450 million. More information about the CSRD and its scope is available in the designated Sustainability Database article.
The reporting requirements are detailed in a delegated act (level 2 legislation), applicable in the EU from the beginning of 2022. The delegated act sets out, inter alia, key performance indicators (KPIs) that different types of companies must report on. Non-financial companies must disclose the share of their turnover, capital and operational expenditure associated with environmentally sustainable economic activities, while financial institutions (large banks, asset managers, investment firms and insurance firms) must disclose the share of environmentally sustainable economic activities in the total assets they finance or invest in. The delegated act also includes mandatory reporting templates for such reporting. The delegated act was simplified by an amendment act adopted by the Commission on 4 July 2025 that is expected to be applicable for the reporting for the 2026 reporting for the 2025 financial year. - The regulation imposes specific disclosure requirements on financial market participants (FMPs) offering certain financial products: The EU Taxonomy Regulation is linked to the Sustainable Finance Disclosure Regulation (SFDR), and imposes Taxonomy-related disclosure requirements in respect of funds and other financial products that either make available sustainable investments (as defined in the SFDR) with an environmental objective or promote environmental characteristics. The requirements entail obligations to address the product's "taxonomy performance" in pre-contractual disclosures (such as fund prospectuses) and ongoing product reporting.
So, what activities are considered "environmentally sustainable"?
For an economic activity to be "taxonomy aligned" under the EU Taxonomy Regulation, it needs to demonstrate that it makes a substantial contribution to at least one of six environmental objectives, without causing significant harm to any of the other five objectives. The six environmental objectives are: (1) climate change mitigation; (2) climate change adaptation; (3) sustainable use and protection of water and marine resources; (4) transition to a circular economy; (5) pollution prevention and control; and (6) protection and restoration of biodiversity and ecosystems.
In addition, the activity must comply with minimum safeguards in certain international guidelines and conventions (e.g. OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights).
The classification system in the EU Taxonomy Regulation (level 1 legislation) works together with supplementing "technical screening criteria" set out in so called delegated acts (level 2 legislation) for each environmental objective. The technical screening criteria are sector-based and set out detailed requirements, in essence defining the economic activities within a given sector qualifying as "environmentally sustainable" under the EU Taxonomy.
The first step in determining whether an activity is "environmentally sustainable" under the EU Taxonomy is to establish whether the activity is "taxonomy eligible", i.e., whether it is one of the specific economic activities covered by the taxonomy classification system. If the activity is taxonomy eligible, the next step is to assess whether the activity is "taxonomy aligned". The requirements for an activity to be "eligible" and "aligned" are set out in the technical screening criteria. The technical screening criteria are therefore crucial in understanding the "taxonomy performance" of an undertaking and what areas a business needs to improve in order to be taxonomy aligned.
Each of the six environmental objectives have a set of technical screening criteria. The technical screening criteria for contribution to the first two environmental objectives (i.e., climate change mitigation and climate change adaptation) was formally adopted by the EU Commission in June 2021 and has been applicable from 1 January 2022. A supplementary act with technical screening criteria for the two first objectives, covering gas related activities and nuclear power, has also been adopted and has been applicable since 1 January 2023.
The process related to the adoption of the technical screening criteria has been subject to major discussions and although the current text has been adopted and is applicable, the delegated acts will evolve over time. The European Commission has communicated that the screening criteria will be subject to regular review, ensuring that new sectors and activities, including transitional activities, can be added over time. The ongoing work on review and development under the Taxonomy Regulation will be advised by a permanent expert group of the EU Commission, the Platform on Sustainable Finance (the "Platform").
Technical screening criteria for the other four environmental objectives, i.e., (i) sustainable use and protection of water and marine resources; (ii) transition to a circular economy; (iii) pollution prevention and control; and (iv) protection and restoration of biodiversity and ecosystems are set out in a delegated act applicable as of 1 January 2024.
On 12 July 2021, the Platform on Sustainable Finance published two draft reports pertaining to the extension of the taxonomy: A draft report on a social taxonomy and a report on environmental transition economy.
The final report on the social taxonomy was published by the Platform on 28 February 2022. In the report, the Platform proposes a social taxonomy that consists of three objectives: decent work (including for value-chain workers), adequate living standards and wellbeing for end-users and inclusive and sustainable communities and societies.
The final report on an extended environmental taxonomy was published by the Platform on 29 March 2022. The report pertains to the potential extension of the taxonomy to classify a wider range of activities beyond those that are "green" to cover, inter alia, activities that are significantly harmful to environmental sustainability and those that have no significant impact on it.
Who does it impact?
- Financial market participants, banks, insurance undertakings, investors, issuers, certain other large undertakings, policymakers and regulators.
- The EU Taxonomy impacts companies across several industries.
Status: In force
In force and applicable in the EU and in Norway.
On 12 July 2020 the EU Taxonomy Regulation entered into force and has been applicable in the EU from 1 January 2022.
The Taxonomy Regulation is supplemented by delegated acts providing sector-specific screening criteria applicable to each of the industries covered by the EU Taxonomy Regulation, and delegated acts relating to the disclosure and reporting undertakings of financial market participants and certain large public-interest entities. The technical screening criteria and reporting requirements for the first two environmental objectives became applicable on 1 January 2022.
The screening criteria for the remaining four environmental objectives became applicable 1 January 2024.
The Taxonomy is intended to be a "living document", and the Platform on Sustainable Finance and the Commission continue to define new activities and develop new technical screening criteria.
The Taxonomy Regulation entered into force in Norway 1 January 2023 through a new Norwegian act (Nw: Lov om offentliggjøring av bærekraftsinformasjon i finanssektoren og et rammeverk for bærekraftige investeringer), and was included in the EEA Agreement through a Joint Committee Decision of 29 April 2022.
On 26 February 2025, the European Commission proposed significant amendments to the Taxonomy framework through an Omnibus package, including, among other things, the following: (i) limiting the scope of entities subject to mandatory reporting to entities in scope of the CSRD that have a net turnover of more than EUR 450 million; (ii) simplifying the reporting templates in a manner that would reduce data points by almost 70%; (iii) exempting companies from assessing Taxonomy-eligibility and alignment of their economic activities that are not financially material for their business (e.g. those not exceeding 10% of their total turnover, capital expenditure, or total assets); and (iv) amending the green asset ratio (GAR) so that banks would be able to exclude from the denominator of the GAR, exposures that relate to undertakings which are not under the scope of the CSRD.
The simplification to the reporting templates were adopted in July 2025 and are expected to be applicable for the reporting for the 2025 financial year. The Norwegian Ministry of Finance has stated that Norwegian entities may rely on the simplified templates if the amendments enter into effect in the EU as expected, regardless of whether the amendment act has been implemented in Norwegian law at the time of reporting.
On 7 November 2025, the Commission launched a consultation on reviewing the Environmental Delegated Act to update and simplify the technical screening criteria.
Relation to other initiatives and regulations
- The EU Taxonomy is the first step of the EU Commission Action Plan on Financing Sustainable Growth.
- The EU Taxonomy is also linked to the other regulatory initiatives under the Europeans Commission Action Plan on Financing Sustainable Growth, including the Sustainable Finance Disclosure Regulation, the proposed European Green Bond Standard and the Corporate Sustainability Directive ("CSRD"). The scope of the CSRD obligation to publish sustainability reporting determines the scope of undertakings required to publish disclosures under Article 8 of the Taxonomy Regulation. The scope will gradually increase over the coming years, as set out in the CSRD.
Thommessen's comments
The EU Taxonomy Regulation (Regulation (EU) 2020/852) is a major development in sustainable finance, setting out the first EU standard for what economic activities can be considered environmentally sustainable. This classification system is coupled with comprehensive reporting requirements for certain large public interest entities and disclosure requirements in respect of certain financial products. The two "pillars" of the EU Taxonomy Regulation – i.e., the classification system and the reporting and disclosure requirements – represent an ambitious and comprehensive set of rules within sustainable finance.
The EU Taxonomy Regulation does not impose requirements on undertakings to align their activities with the framework's criteria for environmentally sustainable activities, and for most undertakings, no reporting or disclosure is required. However, many undertakings are required to provide information on the "taxonomy eligibility" and "taxonomy alignment" of its activities by institutional investors, insurance undertakings and banks subject to direct reporting and/or disclosure requirements. Further, as a result of the applicability of the EU Taxonomy Regulation, we expect distributors and advisors, end-investors and the wider public to look more closely into businesses whose activities are covered by the classification system of the EU Taxonomy Regulation.
Industry sectors currently covered by the classification system include, e.g., manufacturing, energy, transport, construction, real estate activities and certain gas and nuclear activities. Accordingly, the EU Taxonomy Regulation impacts a wide range of industry sectors, and more activities will be included in the future as the EU's intention is that the Taxonomy shall be a "living document" taking into account societal and technological developments.
Businesses should look into the activities covered by the EU Taxonomy Regulation and the related technical screening criteria to understand how and in what way they may be impacted directly or indirectly. If a business activity is covered by the EU Taxonomy Regulation (i.e., it is "taxonomy eligible"), one should have a clear understanding of how the business can adapt to meet the criteria in order to be "taxonomy aligned".
Under current rules, companies subject to reporting obligation under the Corporate Sustainability Reporting Directive (the "CSRD") (as implemented into national legislation) are also required to report on their "taxonomy performance".
On 26 February 2025, the European Commission proposed comprehensive amendments to the scope of entities subjected to reporting requirements under the Taxonomy Regulation, as well as simplifications to the contents and format of the reporting requirements. Entities should follow these developments, as they may affect the required data points that must be reported on, or indeed whether the entity needs to report at all.
Certain financial market participants offering financial products with some degree of environmental sustainability ambitions, are also subject to direct disclosure obligations under the Taxonomy Regulation.