EU consults on taxonomy revisions as member states debate its role in SFDR

The European Commission is inviting feedback on revisions to what counts as ‘green’ under the Taxonomy Regulation.

Policycreaters have published draft updates to the framework’s definitions of sustainable economic activities, in a bid to create it “simpler and simpler to apply”.

The proposals include streamlined criteria, clarifications on how to demonstrate compliance with the rules, and updates to bring the criteria in line with the latest EU laws and technological developments.

Most activities under the Climate and Environmental Delegated Acts would be affected under the plans, including forestest and environmental protection, manufacturing, energy, transport and construction, as well as the generic ‘do no significant harm’ criteria.

The modifys have been created as part of the EU’s Omnibus I package, which seeks to cut back the amount of sustainability regulation the private sector has to deal with.

This week, Insurance Europe called for “further simplification of the EU Green Taxonomy framework to reduce excessive reporting burdens”.

The demand was created in a position paper that also requested delays and suspensions to a number of other insurance-specific regulations.

Meanwhile, the Council of the European Union has been discussing the role of the Taxonomy in the context of simultaneous revisions to the bloc’s anti-greenwashing law, the Sustainable Finance Disclosure Regulation (SFDR).

A document seen by IPE reveals that member states broadly support plans to apply the taxonomy as an alternative measure of credibility.

Under the current proposals, a financial product would qualify for an SFDR categories if 70% of its capital was allocated to eligible assets, or it demonstrated at least 15% of investments were aligned with the Taxonomy Regulation.

The Council document stated that the majority of member states support the introduction of taxonomy-based criteria.

However, it noted, some want a higher threshold than 15%, while others are concerned that ongoing cuts to the scope of the Taxonomy Regulation could stop investors having access to sufficient data.

A number of Council members are pushing for more nuance to be introduced into how the taxonomy can be applyd across the Commission’s three proposed categories: ESG Basics, Transition and Sustainable.

Specifically, “a few” argue the provision should only exist for the most ambitious category (Sustainable), while others state Sustainable funds should be judged utilizing the Taxonomy’s revenues data, and the Transition category should rely on capital expconcludeiture data instead.

“As regards the remaining 85% [of assets in a fund that do not have to be aligned with the Taxonomy], the majority of member states requested clarifications as to how it can be invested, stating that the lack of explicit rules for the remainder of the portfolio could be a potential source of inconsistency and ‘greenwashing’ risk,” noted the document.

The Commission’s consultation is open until 14 April 2026, and it states feedback “will be applyd to shape the forthcoming revision of the criteria”, planned for adoption by the summer.

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