Issuers: Phased-in implementation of Article 8 of the EU Taxonomy Regulation as from 1 January 2022

Article 8 of the Taxonomy Regulation¹  aims to increase transparency in the market and prevent greenwashing by providing investors with information on the environmental performance of the assets and economic activities of Issuers² subject to the NFRD³. The information requested may differ for financial or non-financial undertakings.

Article 8 of the Taxonomy Regulation requires undertakings that are subject to the NFRD to disclose information on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation.

The Taxonomy Regulation identifies such environmentally sustainable economic activities based on technical screening criteria set out in the Commission’s delegated acts developed under this Regulation. The first delegated act concerning the technical screening criteria for economic activities with significant contribution to climate change mitigation and climate change adaptation was formally adopted for scrutiny by the co-legislators on 4 June 2021 (the ‘Climate Delegated Act’⁴).

On 6 July 2021, a delegated act supplementing Article 8 of the Taxonomy Regulation was adopted by the Commission for scrutiny by the co-legislators (the ‘Disclosures Delegated Act’⁵). The Disclosures Delegated Act specifies the content, methodology and presentation of information to be disclosed by both financial and non-financial undertakings concerning the proportion of environmentally sustainable economic activities in their business, investments or lending activities. The rules set out in the Disclosures Delegated Act allow companies to translate the technical screening criteria of the afore-mentioned Climate Delegated Act (and the future Environmental Delegated Act, see below) into quantitative economic performance indicators – the KPIs – which will be publicly disclosed.

The Taxonomy Regulation provides for a phased implementation, with different rules for financial and non-financial undertakings, and whose first steps are the following:

• From 1 January 2022 until 31 December 2022, and in accordance with Article 10 (1) of the Disclosures Delegated Act, non-financial undertakings shall disclose:

(a) the proportion of Taxonomy-eligible and Taxonomy non-eligible economic activities in their total turnover, capital and operational expenditure; and

(b) the qualitative information referred to in Section 1.2. of Annex I of the Disclosures Delegated Act relevant for this disclosure, including but not limited to a description of the nature of their Taxonomy-eligible economic activities, by referring to the Climate Delegated Act.

• From 1 January 2022 until 31 December 2023, and in accordance with Article 10 (2) of the Disclosures Delegated Act, financial undertakings shall disclose:

(a) the proportion in their total assets of exposures to Taxonomy non-eligible and Taxonomy-eligible economic activities;

(b) the proportion in their total assets of the exposures to central governments, central banks and supranational issuers, and derivatives;

(c) the proportion in their total assets of the exposures to undertakings that are not subject to the NFRD; and

(d) the qualitative information referred to in Annex XI of the Disclosures Delegated Act.

Credit institutions shall also disclose the proportion of their trading portfolio and on demand inter-bank loans in their total assets.

Insurance and reinsurance undertakings shall also disclose the proportion of Taxonomy-eligible and Taxonomy non-eligible non-life insurance economic activities.

• For the purpose of the above reporting obligations, no comparative information is needed.

Finally, Article 8 of the Taxonomy Regulation also specifies that if an undertaking publishes non-financial information pursuant to the NFRD in a separate report, the information referred to in paragraphs 1 and 2 of this Article shall be published in that separate report.

Next steps

From the financial year 2022, the Disclosures Delegated Act will fully apply to non-financial undertakings and one year after to financial undertakings, i.e. for the financial year 2023.

For that purpose, the second delegated act concerning the technical screening criteria for economic activities with significant contribution to the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection and restoration of biodiversity and ecosystems (known as the ‘Environmental Delegated Act’) is currently being developed and will be published in 2022.

By 30 June 2024, the Disclosures Delegated Act will be reviewed in particular with respect to the treatment in the KPIs of exposures of financial undertakings to sovereigns and non-NFRD undertakings.

As of 1 January 2026, the Disclosures Delegated Act will also apply to credit institutions for the KPIs on services other than lending and on trading portfolio for the financial year 2025.

The Climate and Disclosures Delegated Acts are now being scrutinised by the European Parliament and the Council and will apply from 1 January 2022, if no objections are made.