The EU Taxonomy Regulation: Classification of economic activities
The overall objective of the EU Taxonomy Regulation is to classify economic activities for more transparency. This means that the taxonomy sets requirements for economic activities that must be met in order for them to be classified as sustainable. In conjunction with the Disclosure Regulation and the reporting obligations, information on clearly defined requirements is thus provided to facilitate sustainable investment. Accordingly, the EU Taxonomy Regulation must be applied on a mandatory basis by:
- Financial market participants offering financial products and providers of occupational pension plans
- large companies that are already obliged to disclose under the Corporate Sustainability Reporting Directive (CSRD)
- EU Member States, to the extent they define labels/standards for green financial products and bonds
All companies affected by the provisions of the EU Taxonomy Regulation must state how and to what extent their business activities are aligned with the EU taxonomy. To do this, they must show what proportion of their turnover and what proportion of capital expenditure and operating costs are taxonomy-compliant. Indirectly, other companies could be affected by the need to provide data to customers or investors.
The Sustainable Finance Disclosure Regulation: transparent financial products
The Sustainable Finance Disclosure Regulation (SFDR) requires EU financial market participants such as asset managers, financial advisers and insurance providers to disclose information on the sustainability of their investment decisions. The Regulation has been in force since March 2021. Among other things, the Regulation is intended to create transparency for end investors regarding sustainability risks that could have a negative impact on financial returns. On the other hand, it is intended to enable the evaluation of investments that could have a negative impact on the environment and social factors. To the regulation
Corporate Sustainability Reporting Directive
Since 2018, there has been a reporting obligation to disclose non-financial information for European listed and large public interest companies with more than 500 employees, a balance sheet total of more than 20 million euros or a net turnover of more than 40 million euros, as well as for financial companies. However, the EU Commission is pursuing the goal of making corporate sustainability reporting more consistent, comparable and based on verifiable data. With the Corporate Sustainability Reporting Directive (CSRD), the Commission published an initial proposal for implementation in April 2021. This is to replace the currently applicable CSR Directive (the Non-Financial Reporting Directive) from December 2022. Within this framework, the reporting obligations are to be expanded and uniform European reporting standards developed on the basis of the ESG structure. In addition, there is to be an obligation for external auditing of the reporting. In perspective, the new directive will apply to all companies with 250 or more employees and a balance sheet total of more than 20 million euros or a turnover of more than 40 million euros, as well as to all capital market-oriented small and medium-sized enterprises. To the CSRD