EU Taxonomy developments: Launch of stakeholder request mechanism and publication of FAQs relating to Taxonomy Regulation

Launch of stakeholder request mechanism

The European Commission and the Platform on Sustainable Finance have established a stakeholder request mechanism to capture and address suggestions from stakeholders regarding EU Taxonomy activities, whether in relation to new activities that could be added or potential amendments to the technical screening criteria ("TSC") of existing activities. The mechanism allows stakeholders to submit their suggestions through a questionnaire, a method that seeks to promote evidence-based suggestions (scientific and/or technical) to substantiate the relevance of the activity, its compliance with the requirements of the EU Taxonomy Regulation and, if applicable, the suggested substantial contribution and do no significant harm ("DNSH") criteria. For more on the EU Taxonomy, see our earlier blog here and insight here.

The mechanism will continue to run on an ongoing basis, so stakeholders can submit their suggestions at any given time. The Platform on Sustainable Finance will process the first set of responses on 15 December 2023, and subsequent responses thereafter on dates to be confirmed.

Publication of European Commission notices: EU Taxonomy FAQs on technical screening criteria and sustainability disclosures

The EU's Official Journal has published two recent European Commission notices containing responses to FAQs relating to delegated legislation under the Taxonomy Regulation. The responses complement the first set of FAQs issued in October 2022 and are intended to assist reporting entities in the implementation of the relevant legal provisions. All FAQs are published in the FAQ section of the EU Taxonomy Navigator.

The Commission Notice on the interpretation and implementation of certain legal provisions of the Taxonomy Climate Delegated Act establishing TSC for economic activities that contribute substantially to climate change mitigation or adaptation and DNSH to other environmental objectives covers:

• cross-cutting questions applicable to all activities covered in the Taxonomy Climate Delegated Act;
• sector-specific questions on TSC; and
• questions on recurring DNSH criteria.

This notice contains 187 additional FAQs relating to the practical implementation of EU Taxonomy in the financial year 2022 reporting exercise. The cross-cutting FAQs relate to processes, verification and evidence, benchmarks and the calculation of greenhouse gas emissions, among other things. The sector-specific FAQs on TSC cover forestry, manufacturing, energy, water, transport, construction, information technology and consultancy services. 56 questions are dedicated to construction and real estate activities, demonstrating the importance of this sector for the Taxonomy alignment assessment. Market participants will also welcome the further clarifications on the generic DNSH criteria set out in Appendix A to D, which apply to most activities covered in the Taxonomy Climate Delegated Act. This includes the mandatory climate risk and vulnerability assessment (Appendix A) as well as the environmental impact assessment (Appendix D), which have often led to difficulties in the practical implementation.

The Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of the Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets covers:

• general questions, including on the envisaged timeline for the application of Taxonomy-related disclosures and the envisaged approach for Taxonomy-related reporting in relation to the environmental objectives;
• questions on turnover key performance indicators ("KPI");
• questions on CapEx KPI; and
• questions on OpEx KPI.

This notice is much shorter, containing only 34 additional FAQs. Nevertheless, some of these FAQs will potentially have a significant impact on future Taxonomy reporting. For example, the European Commission requires disclosure of separate Taxonomy alignment percentages for companies that are exempt from sustainability reporting due to inclusion in a group report (FAQ 12). The European Commission also clarifies that voluntary Taxonomy reporting at group level may not replace mandatory Taxonomy reporting for EU subsidiaries (FAQ 11). The notice also deals with double counting (FAQs 8 and 16) and provides a limited exemption from the Taxonomy alignment assessment for activities not covered by available data or evidence (FAQ 13).