Latest Developments on the EU Taxonomy Regulation
Simplification of the EU Taxonomy Rules
Since 2020, European Regulation 2020/852 on the establishment of a framework to facilitate sustainable investment (the EU "Taxonomy Regulation") established a classification of certain activities based on sustainable criteria. As part of the broader "Omnibus" package for the simplification and revision of recent EU ESG rules, the European Commission (the "Commission") has also moved to simplify the EU Taxonomy framework.
On July 4, 2025, the Commission adopted a delegated regulation that amended a number of EU regulations that implement various aspects of the Taxonomy Regulation, amending delegated regulations (EU) 2021/2178 (the "Disclosure Delegated Act"), (EU) 2021/2139 (the "Climate Delegated Act"), and (EU) 2023/2486 (the "Environment Delegated Act").
As amended by the Omnibus package, the Taxonomy Regulation would include a de minimis materiality threshold whereby both non-financial and financial undertakings are exempted from assessing activities under the Taxonomy Regulation if the activities generate less than 10% of the cumulative value of the entity's revenue, capital expenditure ("CAPEX"), or operating expenses ("OPEX"). This potential exemption is assessed separately for each performance indicator. The simplification should lift burdensome calculation on ancillary activities. By way of illustration, under the previous version of the Taxonomy Regulation, a legal entity subject to the Taxonomy Regulation reporting requirement was expected to report on the alignment of its "[a]cquisition and ownership of buildings" activity based on the criteria listed in the Climate Delegated Act, if it was the owner of a building. This meant that a company with a main business that is unrelated to real estate (and may not even be listed in the Taxonomy Regulation) would have had to file a report under the Taxonomy Regulation just because it owned its headquarters or another building. With the new, simplified Delegated Act, such a company will no longer have a reporting obligation unless its activities related to acquisition or ownership of buildings amount to 10% or more of its revenue, CAPEX, or OPEX.
Other significant modifications include a significantly shorter general reporting template, leading to a reduction of 64% of data points required for non-financial companies and up to 89% for credit institutions. Also, the "do no significant harm" (generally referred to as "DNSH") criteria relating to the use and presence of chemicals is simplified to make reporting under the Taxonomy Regulation easier for activities related to the green transition, including manufacturers of solar photovoltaic panels and batteries.
These new rules are expected to be formally published in the coming months after a "scrutiny" period by the European Parliament is finalized. Legal entities covered by the Taxonomy Regulation are encouraged to apply the revised rules for the 2026 reporting cycle covering the 2025 financial year, even though they can still apply the previous regime for 2025 to avoid making last-minute modifications to their reports.
Fossil Gas and Nuclear Energy Confirmed as Transitional Activities
In 2022, the "Climate Delegated Act" and the "Disclosure Delegated Act" were amended by Delegated Regulation (EU) 2022/1214 to include, under strict conditions, certain nuclear and fossil gas activities within the scope of the Taxonomy Regulation. However, this 2022 amendment was challenged before the General Court of the European Union ("EGC") by Austria, who claimed it should be annulled. In a ruling dated September 10, 2025 (T-625/22, Republic of Austria v. Commission), the EGC dismissed Austria's action and confirmed the Commission's broad margin of discretion to set technical screening criteria through delegated acts in areas involving complex scientific and economic assessments, without overlapping with the "essential elements" of the general Taxonomy Regulation. In particular, with respect to nuclear energy, the Commission could validly consider that its production was close to zero greenhouse gas emissions and that there were currently no other low-carbon alternatives. For natural gas, the thresholds set out by the 2022 Delegated Act can allow economic activities in the fossil gas sector to be categorized as "transitional" for the purpose of alignment with the Taxonomy Regulation. This ruling confirms the validity of Delegated Regulation (EU) 2022/1214, which includes fossil gas and nuclear energy among the activities contributing to the mitigation of climate change.
