At the end of November, the European Commission published 155 FAQs that clarify various aspects of the Taxonomy Regulation. The aim of the FAQs is to help stakeholders cost-effectively comply with regulatory requirements and ensure that the reported information is comparable and useful in scaling up sustainable finance.
Adopted in 2020, and with effect starting in 2022, the Taxonomy Regulation created a unified EU classification system of environmentally sustainable economic activities and set transparency requirements for certain non-financial and financial undertakings with respect to those activities. As part of compliance with the EU's new Corporate Sustainability Reporting Directive, a significant number of companies – especially U.S.-based multinationals – are dealing with the complexities of Taxonomy Regulation compliance for the first time.
The November FAQs contain technical clarifications relating to the technical screening criteria in the Taxonomy Climate Delegated Act and the Taxonomy Environmental Delegated Act, as well as the disclosure obligations for the non-climate environmental objectives in the amendments to the Taxonomy Disclosures Delegated Act. The November FAQs are the sixth set of Taxonomy Regulation FAQs published.
The November FAQs are organized as follows, with the number of questions on each topic indicated parenthetically:
- General questions (9).
- There are separate sections in the FAQs relating to each of the following objectives:
- Climate change mitigation (Annex I to the Taxonomy Climate Delegated Act).
This is the largest section, with 58 FAQs, more than a third of the total. This section is broken out into FAQs relating to the manufacturing (13), energy (6), transport (17), construction and real estate (18) and information and communication (5) sectors.
- Climate change adaptation (Annex II to the Taxonomy Climate Delegated Act).
This section contains FAQs relating to energy (1), water supply, sewerage, waste management and remediation (2), transport (1) and disaster risk management (1).
- Water and marine resources (Annex I to the Taxonomy Environmental Delegated Act).
This section contains 1 general FAQ and 2 FAQs relating to water supply, sewerage, waste management and remediation activities.
- Transition to a circular economy (Annex II to the Taxonomy Environmental Delegated Act).
This section is broken out into manufacturing (11), water supply, sewerage, waste management and remediation activities (7), construction and real estate activities (11), information and communication (3) and services (5).
- Pollution prevention and control (Annex III to the Taxonomy Environmental Delegated Act).
This section includes 6 FAQs pertaining to water supply, sewerage, waste management and remediation activities.
- Biodiversity and ecosystems (Annex IV to the Taxonomy Environmental Delegated Act).
This section is broken out into environmental protection and restoration activities (3) and accommodation activities (4).
- There also are FAQs relating to the following:
- The generic Do No Significant Harm (DNHS) criteria.
This section includes FAQs pertaining to climate change adaptation (6), pollution prevention and control (5) and the protection and restoration of biodiversity and ecosystems (5).
- The Taxonomy Disclosures Delegated Act (12).
Given the highly technical nature of most of the FAQs, which run 75 pages, we do not discuss them in detail in this post. The FAQs are available here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
