EU Taxonomy spared from omnibus as consultation begins on Level 2 changes

The European Commission has left the taxonomy out of its long-awaited omnibus package, opting instead to change the framework’s secondary legislation.   

Policymakers have launched a consultation based on recent recommendations from its advisory body, the Platform on Sustainable Finance (PSF), which include “significantly shortened and simplified” reporting templates that promise to reduce non-financial companies’ requirements by 66%.   

It also suggests options for making the Do No Significant Harm criteria more usable.  

“We’ll simplify certain provisions under the criteria for the famous, or infamous, Do No Significant Harm,” explained EU finance commissioner, Maria Albuquerque, during a press conference today.  

The Commission is also taking up PSF’s recommendation to introduce materiality thresholds into the taxonomy, based on the proportion of a company’s overall assets an activity accounts for.  

“A de minimis threshold of 10% would allow reporting companies to focus their efforts of assessing Taxonomy compliance (e.g., eligibility and alignment) of those activities that represent a significant share of their revenues, capital or operational expenditures,” the consultation document stated. 

The green asset ratio, an unpopular element of the Taxonomy that requires banks to report on the proportion of their aligned assets, will be revised to remove non-reporting entities from the denominator.  

The Commission is under a lot of pressure to remove the GAR altogether, but that would involve changes at Level 1.  

CSRD 

Although the Taxonomy won’t be touched at Level One for the time being, it will be significantly impacted by proposed changes to CSRD, which defines which companies have to comply with the regulation.  

Plans to reduce CSRD so that it only applies to firms with more than 1,000 employees and €450m in turnover would in turn, according to Albuquerque, cut the level of firms legally mandated to report against the taxonomy by 80%.  

Helena Viñes Fiestas, chair of the PSF welcomed the Commission’s decision not to include the Taxonomy in the omnibus, but told REP she was concerned that cutting the reporting requirements could make it difficult for medium-sized companies to access green finance.  

“As such, it would be beneficial to establish a mechanism for the gradual introduction of these reporting standards,” she suggested.