COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS EU Taxonomy, Corporate Sustainability Reporting, Sustainability Preferences and Fiduciary Duties: Directing finance towards the European Green Deal
Date: 2021-04-21
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU environmental policy, EU growth strategy, climate change policy, delegated legislation, economic instrument for the environment, environmental protection, financial market, green economy, investment, sustainable development

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 21.4.2021  COM(2021) 188 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS EU Taxonomy, Corporate Sustainability Reporting, Sustainability Preferences and Fiduciary Duties:  Directing finance towards the European Green Deal      
 
 
The European Green Deal is Europe’s growth strategy that will improve the well-being and 
health of  citizens, make Europe climate-neutral  by  2050 and protect,  conserve and  enhance 
the EU’s natural capital and biodiversity. An Economy that Works for People also means a 
Just Transition that creates employment and leaves no one behind. To achieve these goals, the 
European financial system  needs to  become more sustainable. This  will require both  robust 
financial legislation and a clear transition path for businesses. The scale of investment needed 
to bring about the necessary changes will put the European financial sector at the heart of a 
sustainable and inclusive economic recovery from the COVID-19 pandemic and of the long-
term sustainable economic development of Europe.  

The EU has taken major steps to build a sustainable finance ecosystem. The EU Taxonomy 
Regulation, the  Sustainable  Finance  Disclosure  Regulation and 
the  Benchmark 
Regulation form  the  foundation  to  increase  transparency  and  provide  tools  for  investors  to 
identify sustainable investment opportunities.  

The Commission is putting forward the EU Taxonomy Climate Delegated Act, a proposal for 
a  Corporate  Sustainability  Reporting  Directive  (CSRD),  revising  the  Non-Financial 
Reporting  Directive,  and  amendments  to  delegated  acts  to  better  reflect  sustainability 
preferences  in  insurance  and  investment  advice  and  sustainability  considerations  in  product 
governance and fiduciary duties. They will help drive a greener, fairer, and more sustainable 
Europe and support the implementation of the Sustainable Development Goals. 

The EU Taxonomy is a robust, science-based transparency tool for companies and investors. 
It  introduces  clear  performance  criteria  for  determining  which  economic  activities  make  a 
substantial  contribution  to  the  Green  Deal  objectives.  These  criteria  create  a  common 
language for businesses and investors, allowing them to communicate about green activities 
with increased credibility and helping them to navigate the transition already under way. The 
EU Taxonomy will also play an important role in creating the EU Green Bond Standard and 
the EU Ecolabel for certain retail financial products.  

Through the EU Taxonomy Climate Delegated Act, the economic activities of roughly 40% 
of  listed  companies,1  in  sectors  which  are  responsible  for  almost  80%  of  direct  greenhouse 
gas emissions in Europe, are already covered, with more activities to be added in the future.2 
Through  this  scope,  the  EU  Taxonomy  can  significantly  increase  the  potential  that  green 
financing offers to support transition, in particular for carbon-intensive sectors where change 
is urgently needed.    

The proposal for the Corporate Sustainability Reporting Directive will set common European 
reporting  rules  that  will  increase  transparency,  requiring  companies  to  report  sustainability 
information in a consistent and comparable manner. The new reporting requirements would 
apply  to  all  large  and  all  listed  companies,  including  listed  small  and  medium-sized 
enterprises  (SMEs).  The  Commission  will  develop  proportionate  standards  for  SMEs.  The 

1 Share of EU domiciled companies with more than 500 employees active in economic sectors covered by the 
EU Taxonomy Climate Delegated Act (Source: Bloomberg). 
2 Source: Eurostat. 

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latter  will  set  a  reference  for  information  that  companies  that  are  within  the  scope  of  the 
CSRD could reasonably request from SME suppliers and clients in their value chains. 

I. 

INTRODUCTION 

Regulation  (EU)  2020/852  on  the  establishment  of  a  framework  to  facilitate  sustainable 
investment (the ‘EU Taxonomy Regulation’), entered into force on 12 July 20203. Through 
this  Regulation,  the  European  Parliament  and  the  Council  mandated  the  European 
Commission  to  provide,  in  delegated  acts,  technical  screening  criteria  for  determining 
whether  an  economic  activity  can  be  considered  as  contributing  substantially 
to 
environmental objectives. These criteria help establish appropriate definitions for companies, 
investors  and  financial  market  participants  on  which  economic  activities  can  be  considered 
environmentally sustainable.  

This mandate is framed by the requirement that technical screening criteria need to be up to 
date  and  based  on  scientific  evidence.  These  criteria  must  be  clear,  practicable  and  easy  to 
apply,  thus  avoiding  unnecessary  administrative  burden.  The  European  Parliament  and  the 
Council have also recognised the importance of public consultation, and explicitly mandated 
the Commission to involve relevant stakeholders and to build on the advice of experts who 
have proven knowledge and experience in the relevant areas. 

As  requested  by  the  European  Parliament  and  the  Council,  the  EU  Taxonomy  Climate 
Delegated Act4 provides the first set of technical screening criteria of the EU Taxonomy and 
a  common  language  around  sustainable  activities.  The  EU  Taxonomy  Regulation  requires 
that investors and companies use these criteria for related disclosures, which will also serve 
as a reliable guide for investment decisions.  

This is complemented by the proposal for the Corporate Sustainability Reporting Directive5, 
which will ensure that companies provide information on the sustainability of their business 
practices  in  a  transparent  and  comparable  manner.  Through  information  on  Taxonomy-
alignment,  transition  investments  and  sustainability  risks,  financial  companies  can  evaluate 
the ambition and environmental performance of financed activities. 

II. 

 THE EU TAXONOMY CLIMATE DELEGATED ACT  

3  Regulation  (EU)  2020/852  of  the  European  Parliament  and  of  the  Council  of  18  June  2020  on  the 
establishment  of  a  framework  to  facilitate  sustainable  investment,  and  amending  Regulation  (EU)  2019/2088, 
OJ L 198, 22.6.2020, p. 13. 
4 Commission Delegating Regulation supplementing Regulation (EU) 2020/852 of the European Parliament and 
of  the  Council  by  establishing  the  technical  screening  criteria  for  determining  the  conditions  under  which  an 
economic  activity  qualifies  as  contributing  substantially  to  climate  change  mitigation  or  climate  change 
adaptation  and  for  determining  whether  that  economic  activity  causes  no  significant  harm  to  any  of  the  other 
environmental  objectives,  see  https://ec.europa.eu/info/law/sustainable-finance-taxonomy-regulation-eu-2020-
852/amending-and-supplementary-acts/implementing-and-delegated-acts_en. 
5 Proposal for a directive amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and 
Regulation (EU) No 537/2014, as regards sustainable corporate reporting by certain undertakings, COM (2021) 
189. 

2 

 
 
                                                           
The EU Taxonomy Climate Delegated Act, subject  to  scrutiny  by the European Parliament 
and  the  Council,  delivers  the  first  set  of  technical  criteria  for  defining  those  activities  that 
contribute  substantially  to  climate  change  mitigation  and  adaptation,  the  first  two  of  six 
environmental objectives in the EU Taxonomy6. 

These  criteria  have  been  developed  based  on  recommendations  by  the  Technical  Expert 
Group  (TEG)  and  following  public  feedback  and  advice  by  the  Platform  on  Sustainable 
Finance7. 

The  volume  of  feedback  received  from  stakeholders  (including  citizens,  public  authorities, 
businesses, non-profit organisations, and academia amongst others) reflected the importance 
of the issue. The vast majority of respondents reiterated the importance of the EU Taxonomy 
as  a  key  tool  supporting  the  process  of  transition  under  the  European  Green  Deal.  The 
summary  of  the  public  consultation  is  available  on  the  Commission’s  sustainable  finance 
website.8  

The feedback also revealed several concerns, including: 

  The  implications  of  an  activity  qualifying  as  ‘environmentally  sustainable’  or  not: 
Some stakeholders were concerned that an activity not qualifying as green under the 
EU  Taxonomy  Climate  Delegated  Act  risks  being  perceived  as  unsustainable,  with 
possible consequences in terms of access to finance for those activities. (Section 1) 
  The  level  of  ambition  and  usability  of  criteria:  While  many  stakeholders  welcomed 
the  level  of  ambition  of  the  criteria  or  even  called  for  higher  ambition,  other 
stakeholders  were  concerned  that  the  ambition  of  the  criteria  was  too  high,  and 
suggested improvements in the usability of criteria. (Section 2) 

  The scope of the EU Taxonomy: Some stakeholders were concerned about the scope 
of activities covered by the criteria being too narrow and the binary nature of the EU 
Taxonomy, which means it will not provide guidance to markets on how to deal with 
activities  that  do  not  meet,  or  are  not  covered  by  the  criteria  listed  in  the  EU 
Taxonomy Climate Delegated Act. (Section 3) 

The following three sections clarify the above issues and explain the steps the Commission 
has taken, or will take in the future, to address them. 

1.  The implications of an activity qualifying as ‘environmentally sustainable’ or not 

Many  stakeholders  were  concerned  that  the  Taxonomy  defines  which  activities  qualify  as 
‘environmentally  sustainable’,  which  could  be  taken  to  mean  that  if  an  activity  is  not 

6  Article  9  of  the  EU  Taxonomy  Regulation  specifies  the  following  six  environmental  objectives:  (a)  climate 
change  mitigation,  (b)  climate  change  adaptation,  (c)  the  sustainable  use  and  protection  of  water  and  marine 
resources, (d) the transition to a circular economy, (e) pollution prevention and control,  and (f) the protection 
and restoration of biodiversity and ecosystems. 
7  The  Platform  on  sustainable  finance  was  created  by  Article  20  of  the  EU  Taxonomy  Regulation.  It  is 
composed of experts from the private and public sector who advise the Commission on the further development 
of the EU Taxonomy. 
8 Commission sustainable finance website link.  

3 

 
 
                                                           
addressed  in  the  EU  Taxonomy  Climate  Delegated  Act,  it  would  automatically  qualify  as 
environmentally ‘unsustainable’. This is not the case. The mere fact that a company does not 
have Taxonomy-aligned activities does not mean that conclusions can be drawn regarding the 
company’s environmental performance or its ability to access finance. 

The EU Taxonomy does not currently define how activities other than green are to be treated. 
It  does  not  define  or  categorize  any  activities  as  ‘improving  the  current  levels  of 
environmental  performance’  but  not  reaching  the  level  of  substantial  contribution.  These 
activities – while important in their own right to support the necessary broad transformation 
of  the  EU  economy  –  will  in  themselves  not  be  sufficient  to  reach  our  green  objectives. 
Similarly, the EU Taxonomy does not define or categorize any activity as ‘environmentally 
unsustainable’.  Also,  not  all  green  activities  that  can  make  a  substantial  contribution  to  the 
environmental objectives are  yet  covered by the  EU Taxonomy Climate  Delegated Act  and 
thus part of the EU Taxonomy. The EU Taxonomy is a living document that will be added to 
over time and updated as necessary. 

The  EU  Taxonomy  is  a  transparency  tool.  It  will  introduce  disclosure  obligations  for  some 
companies  and  financial  market  participants,  requiring  them  to  disclose  their  share  of 
Taxonomy-aligned  activities.  The  disclosure  of  the  proportion  of  Taxonomy-aligned  green 
activities  will  allow  the  comparison  of  companies  and  investment  portfolios  based  on  this 
proportion. Companies, if they wish, can reliably use the EU Taxonomy to plan their climate 
and  environmental  transition  and  raise  financing  for  this  transition.  Financial  market 
participants,  if  they  wish,  can  use  the  EU  Taxonomy  to  design  credible  green  financial 
products. It is expected that the EU Taxonomy will be an enabler of change and encourage a 
transition  towards  sustainability.  However,  while  the  EU  Taxonomy  can  guide  market 
participants  in  their  investment  decisions,  naturally  it  does  not  prohibit  investment  in  any 
activity. There is no obligation on companies to be Taxonomy-aligned, and investors are also 
free to choose what to invest in.  

The  Taxonomy  framework  will  increase  access  to  sustainable  financing  beyond  currently 
existing  market-based  green  finance  tools.  It  includes  more  economic  activities  and  more 
environmental  objectives  than  have  been  used  so  far  in  market-based  green  financing 
frameworks. Notably, it includes some carbon-intensive sectors, enabling market recognition 
for transitioning activities within those sectors.  

Companies  will  be  able  to  count  not  only  turnover,  but  also  certain  operational  and  capital 
expenditure as EU Taxonomy aligned, which will further broaden the opportunities the EU 
Taxonomy will offer. Estimates and early testing of the climate taxonomy criteria showed a 
low  overall  Taxonomy  alignment  today  in  companies’  activities  and  investment  portfolios 
(between one and  five percent,  with  many  companies and investment  portfolios  standing at 
zero). While this figure is expected to rise significantly with the implementation of the Green 
Deal,  it  highlights  the  extent  of  the  transition  still  required  towards  climate  neutrality  by 
2050. 

4 

 
 
The EU Taxonomy is designed for the specific purpose of providing a classification system 
and  improving  transparency.  The  Recovery  and  Resilience  Regulation9  uses  the  ‘do  no 
significant  harm’  principle  of  the  EU  Taxonomy  Regulation  enshrined  in  Article  17  but 
without  requiring  the  use  of  the  criteria  defined  in  the  Taxonomy  Delegated  Acts.  The 
Commission published dedicated technical guidance,10 providing more detail on how to apply 
the  ‘do  no  significant  harm’  principle  for  the  purposes  of  the  Recovery  and  Resilience 
Facility (RRF). This means that the criteria defined in the EU Taxonomy Climate Delegated 
Act do not have any direct binding implication for the implementation of the Recovery and 
Resilience  Facility.  The  Cohesion  Policy  Regulation  also  requires  that  the  objective  of  its 
funds must use the ‘do no significant harm’ principle of the EU Taxonomy Regulation in the 
2021-2027  programming  period,  but  without  requiring  the  use  of  the  criteria  of  the 
Taxonomy Delegated Acts. In the future, the original purpose of the EU Taxonomy should be 
reiterated  and  the  implications  should  be  carefully  assessed  in  terms  of  suitability, 
proportionality and compliance costs, before its inclusion in other policies. 

2.  The level of ambition and usability of criteria in the EU Taxonomy Climate Delegated 

Act 

In  designing  the  Delegated  Acts  to  define  criteria  for  sustainable  economic  activities,  the 
European  Commission  is  bound  to  comply  with  the  mandate  provided  for  by  the  European 
Parliament  and  the  Council  to  identify  the  level  of  ambition  needed  for  green  projects  to 
reach the EU’s environmental objectives.  

The EU Taxonomy recognises as sustainable those activities that make a substantial,  rather 
than a marginal,  contribution to  reaching  EU environmental  objectives.  The EU Taxonomy 
sets  the  criteria  for  substantial  contribution  and  no  significant  harm  based  on  the  level  of 
ambition  of  the  goals  of  the  European  Green  Deal  including  the  EU  climate  neutrality 
objective.  

Based  on  careful  examination  of  the  feedback  received,  modifications  have  been  made, 
compared to the draft delegated act published for public feedback, without undermining the 
level of ambition of the European Green Deal objectives. Some of those changes include:  

  Numerous clarifications to bolster the technical accuracy and usability of the criteria; 
  Further  improvements  in  usability  in  terms  of  simplifying  criteria,  reducing 
complexity  and  overall  burden  and,  where  appropriate,  adjustments  to  make  them 
more specific and flexible; 

  Clarifications  to  better  reflect  subsidiarity  and  shared  competence  between  EU  and 
Member State levels where appropriate (including several clarifications to better take 
into account national regulations);  

9 Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the 
Recovery and Resilience Facility, OJ L 57, 18.2.2021, p. 17. 
10 Commission Notice on Technical guidance on the application of ‘do no significant harm’ under the Recovery 
and Resilience Facility Regulation, 2021/C 58/01, OJ C 58, 18.2.2021, p. 1.  

5 

 
 
                                                           
 

Improved  consistency  with  existing 
consideration of the upcoming reviews where appropriate;  

frameworks,  sectoral 

legislation,  and 

  Specifications  to  the  scope  of  some  transitional  and  enabling  activities  and 

adjustments to make the taxonomy more usable by economic actors; 

  Spelling out better a small number of activities that were covered as part of another 
activity,  where  there  was  a  clear  demand  from  stakeholders  and  where  they  are 
consistent with the objectives and requirements of the EU Taxonomy Regulation;  
  Updated  recitals  underlining  the  need  for  future  reviews  and  the  introduction  of 

additional activities at a later stage. 

3.  The scope of the EU Taxonomy 

Following  public  feedback  and  taking  into  account  recommendations  by  the  Platform  on 
Sustainable Finance, the Commission is considering further developing the EU Taxonomy in 
accordance  with  the  EU  Taxonomy  Regulation  to  address  the  remaining  stakeholder 
concerns, as explained in the next Section.  

In  particular,  the  current  scope  of  the  criteria  outlined  in  the  EU  Taxonomy  Climate 
Delegated  Act  will  expand  in  the  future.  The  criteria  are  dynamic  and  will  be  subject  to 
regular  review.  This  ensures  that  new  sectors  and  activities,  including  transitional  and 
enabling  activities,  may  be  added  to  the  scope  over  time  by  amending  this  Delegated  Act. 
Stakeholders will have the opportunity to suggest activities to be included in the criteria via a 
web portal, which will be established in mid-2021 on the European Commission website. The 
Commission,  with  inputs  from  the  Platform  on  Sustainable  Finance,  will  assess  the 
suggestions.  

In  addition,  the  taxonomy  will  have  an  impact  on  sustainable  finance  internationally.  In 
pursuing the European Green Deal objectives, the EU will cooperate closely with its partner 
countries, also in relevant international fora such as the International Platform on Sustainable 
Finance  (IPSF),  the  G7/G20,  and  the  Financial  Stability  Board  (FSB).  This  includes 
exploring  ways  to  operationalise  the  EU  Taxonomy  globally  in  an  appropriate  and 
proportionate way. As part of this, further work on the usability and international operability 
of the EU Taxonomy will be conducted.  

III. 

NEXT STEPS IN DEVELOPING THE EU TAXONOMY 

In  line  with  the  legal  framework  and  our  past  commitments,  the  Commission  will  adopt  a 
complementary  Delegated  act  of  the  EU  Taxonomy  Regulation  covering  activities  not  yet 
covered  in  the  EU  Taxonomy  Climate  Delegated  Act  such  as  agriculture,  certain  energy 
sectors and certain manufacturing activities.  

This complementary Delegated Act will cover nuclear energy subject to and consistent with 
the  results  of  the  specific  review  process  underway  in  accordance  with  the  EU  Taxonomy 

6 

 
 
 
Regulation. This  process  is  based  on  the  independent  and  scientific  technical  report11 
published in March 2021 by the Joint Research Centre, the European Commission’s science 
and knowledge service12. A review of this report is ongoing through two groups of experts, 
Euratom  Article  31  experts  group  and  the  Scientific  Committee  on  Health,  Environmental 
and Emerging Risks (SCHEER), to complete the scientific evaluation and it will be finalised 
in June 2021.  

This  complementary  Delegated  Act  will  also  cover  natural  gas  and  related  technologies  as 
transitional  activity  in  as  far  as  they  fall  within  the  limits  of  Article  10(2)  of  the  EU 
Taxonomy  Regulation. The  merits  of  a  sunset  clause  for  transitional  activities  will  be 
considered in this context.  

The Commission will adopt this complementary Delegated Act as soon as possible after the 
end of the specific review process expected in summer 2021. 

A separate Delegated Act will cover activities making a substantial contribution to the other 
four environmental objectives as set out in the EU Taxonomy Regulation (sustainable use and 
protection  of  water  and  marine  resources,  transition  to  a  circular  economy,  pollution 
prevention  and  control,  protection  and  restoration  of  biodiversity  and  ecosystems).  The 
Platform on Sustainable Finance is working on recommendations for this Act.  

In addition, Article 26 of the EU Taxonomy Regulation requires the Commission to assess by 
the end of 2021 whether and how the scope of the Taxonomy Regulation could be extended 
to cover other levels of environmental performance than substantial contribution, as well as 
other objectives, such as social objectives. 

IV. 

FINANCING THE TRANSITION TO SUSTAINABILITY 

While the EU Taxonomy Regulation is a key enabler to mobilise investments into long-term 
sustainable  solutions,  the  public  consultation  and  reactions  by  MEPs,  Member  States,  and 
other  stakeholders  in  recent  months  highlighted  the  boundaries  of  the  EU  Taxonomy. In 
particular,  a  widespread  concern  is  that  some  activities,  which  contribute  to  the  green 
transition of the real economy, are not eligible to be included in the Taxonomy.  

Therefore,  the  Commission  will  consider  proposing  legislation  to  support  the  financing  of 
certain  economic  activities,  primarily  in  the  energy  sector,  including  gas,  that  contribute  to 
reducing  greenhouse  gas  emissions  in  a  way  that  supports  the  transition  towards  climate 

11 Joint Research Centre,  Technical assessment of  nuclear energy  with respect to the  ‘do no significant harm’ 
criteria of the EU Taxonomy Regulation, March 2021. Available through the following link.    
12  The  Joint  Research  Centre  report  is  divided  into  two  parts:  the  first  part  focuses  on  the  study  of  relevant 
environmental indicators on the ‘do no significant harm’ criteria on the entire nuclear life cycle and the second 
part focuses on the specific question related to waste that had been highlighted by the TEG. The report found 
that:  “The  analyses  did  not  reveal  any  science-based  evidence  that  nuclear  energy  does  more  harm  to  human 
health or to the environment than other electricity production technologies already included in the Taxonomy as 
activities supporting climate change mitigation. 

7 

 
 
                                                           
 
neutrality throughout the current decade. This proposal would aim at defining timeframes and 
intermediary  steps  for  those  economic  activities,  including  for  existing  investments,  that 
contribute to the transition process in a manner consistent with the European Green Deal. 

Such an approach would enable to follow-up on the European Council conclusions of 11-12 
December 2020, which acknowledge the role of transition technologies such as natural gas.  

Investments in natural gas projects are eligible for funding support by EU instruments, where 
such  investments  support  the  EU  policy  objectives  in  a  manner  consistent  with  the  Green 
Deal.  Examples  include  the  Recovery  and  Resilience  Facility13,  Invest  EU,  the  European 
Regional Development Fund, and the Emissions Trading Scheme Modernisation Fund, which 
allow for natural gas projects to qualify subject to case-by-case assessments.  

The  transition  to  a  climate  neutral  and  sustainable  economy  is  not  a  one-off  event  but  a 
process.  For  companies,  this  transition  means  to  reduce  greenhouse  gas  emissions,  become 
resilient  and  reduce  environmental  harm  over  time.  For  investors,  transition  means  to 
improve the environmental performance of a portfolio over time. Members States must also 
plan and incentivise this transition. 

All  companies  can  invest  in  green  activities.  As  part  of  their  corporate  strategy,  companies 
can use the EU Taxonomy to make plans to transition specific activities to meet Taxonomy 
thresholds.  Other  science-based  metrics  may  help  them  to  set  sustainability  performance 
targets for the company as a whole.  

Tasked  by  the  European  Commission,  the  Platform  on  Sustainable  Finance  has  provided 
advice  on  how  to  acknowledge  the  role  of  the  EU  Taxonomy  in  contributing  to  the  green 
transition.  In  their  report  to  the  European  Commission  published  in  March  202114,  the 
Platform  recommended,  among  other  issues,  to  further  exploring  options  to  recognize  – 
outside  of  the  current  framework  of  the  EU  Taxonomy  –  the  efforts  made  to  improve  the 
performance of activities towards the substantial contribution criteria.  

V. 

CONSISTENT AND COHERENT CORPORATE SUSTAINABILITY 
REPORTING 

1.  A new Corporate Sustainability Reporting Directive 

The Commission is  proposing a new Corporate  Sustainability  Reporting  Directive (CSRD), 
which  would  revise  the  existing  reporting  rules  that  were  introduced  by  the  Non-Financial 
Reporting  Directive  (NFRD).  The  proposed  Corporate  Sustainability  Reporting  Directive 
would  be  the  foundation  of  a  consistent  flow  of  sustainability  information  through  the 
financial value chain and for other stakeholders. Information disclosed by companies would 
therefore  be  available  for  analysts  in  banks,  insurance  companies,  asset  management 

13  Subject  to  the  specific  conditions  in  Annex  III  of  the  Commission  Notice  on  Technical  guidance  on  the 
application of ‘do no significant harm’ under the Recovery and Resilience Facility Regulation. 
14    Platform  on  Sustainable  Finance,  Transition  finance  report,  March  2021.  Available  through  the  following 
link.  

8 

 
 
 
 
 
                                                           
companies  or  credit  rating  agencies,  for  end  investors  and  for  non-governmental 
organisations and other stakeholders that wish to better hold companies to account for their 
social and environmental impacts. With a view to the objectives of the European Green Deal, 
companies  included  under  the  scope  would  have  to  report  on  the  impact  of  their  business 
model and strategy towards the transition to a sustainable and climate neutral economy. The 
proposed  Directive  would  ensure  that  company  sustainability  reporting  corresponds  to  the 
needs  of  financial  market  participants  subject  to  the  disclosure  requirements  of  the 
Sustainable  Finance  Disclosure  Regulation15.  It  also  takes  account  of  the  Commission’s 
intention  to  put  forward  a  proposal  for  a  Sustainable  Corporate  Governance  Initiative  later 
this year. 

Most companies face rising costs due to uncoordinated information demands from investors 
and other stakeholders for corporate sustainability information. While the proposed Corporate 
Sustainability  Reporting  Directive  would  imply  additional  reporting  costs  for  companies,  it 
aims to reduce these costs over the medium to long term by building consensus around the 
essential information that companies should disclose. 

The  proposed  Corporate  Sustainability  Reporting  Directive  would  apply  to  some  49  000 
companies, compared to approximately 11 000 that are subject to the existing sustainability 
reporting  rules  (the  Non-Financial  Reporting  Directive).  All  large  companies,  and  all 
companies listed on EU regulated markets except listed micro-enterprises, would be subject 
to these reporting requirements. They would have to report information on the full range of 
environmental,  social  and  governance  issues  relevant  to  their  business.  Consistent  with  the 
existing rules laid down in the Non-Financial Reporting Directive, they would have to report 
about the risks to the company arising from sustainability issues, and about their own impacts 
on people and the  environment. This  will include information  on companies’ global  supply 
chains  regarding  issues  such  as  forced  and  child  labour  and  consistent  with  internationally 
recognised  principles  and  frameworks  such  as  the  International  Labour  Organisation 
Declaration  on  Fundamental  Principles  and  Rights  at  Work.  The  information  they  report 
would be audited, and it would be digitally tagged so that it can feed into the European Single 
Access Point envisaged under the Capital Markets Union Action Plan16. 

The  proposed  Corporate  Sustainability  Reporting  Directive  would  require  companies  to 
report  according  to  mandatory  EU  sustainability  reporting  standards.  The  Commission  will 
adopt delegated acts to provide for such standards taking into consideration technical advice 
from the European Financial Reporting Advisory Group, working with key stakeholders, and 
after  consultation  of  Member  States  and  relevant  EU  bodies,  including  the  European 
Supervisory  Authorities,  the  European  Environment  Agency,  the  European  Agency  on 
Fundamental  Rights  and  the  Platform  on  Sustainable  Finance.  The  first  set  of  standards 
would be adopted by October 2022. 

15  Regulation  (EU)  2019/2088  of  the  European  Parliament  and  of  the  Council  of  27  November  2019  on 
sustainability‐ related disclosures in the financial services sector, OJ L 317, 9.12.2019, p. 1. 
16    Communication  from  the  Commission  on  a  Capital  Markets  Union  for  people  and  businesses-new  action 
plan, COM(2020) 590 final. 

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The  standards  will  be  tailored  to  EU  policies,  while  building  on  and  contributing  to 
international standardisation initiatives. Therefore, while moving ahead with EU standards to 
meet  the  ambition  of  the  Green  Deal  and  the  growing  information  needs  of  investors,  the 
Union will strive towards convergence of sustainability reporting at a global level, building 
on initiatives such as the Task Force on Climate-related Financial Disclosures (TCFD). 

The  Commission  is  proposing  to  develop  standards  for  large  companies  and  separate, 
proportionate  standards  for  SMEs.  While  SMEs  listed  on  regulated  markets  would  be 
required to use these proportionate standards, non-listed SMEs – which are the vast majority 
of SMEs – may choose  to  use them on a voluntary basis. The Commission  stands ready to 
provide tailor made technical support to Member States to enable sustainability reporting by 
companies, in particular by SMEs. 

2.  Coherent corporate sustainability reporting requirements 

The  proposed  Corporate  Sustainability  Reporting  Directive  aims  to  ensure  consistency 
between  reporting  requirements  under  the  EU  Taxonomy  Regulation  and  company 
sustainability  reporting.  Article  8  of  the  Taxonomy  Regulation  requires  companies  falling 
within the scope of the existing NFRD, and additional companies brought under the scope of 
the proposed Corporate Sustainability Reporting Directive, to report certain indicators on the 
extent to which their activities are sustainable as defined by the EU Taxonomy. In particular, 
these  companies  shall  disclose  the  proportion  of  their  turnover,  capital  expenditure  and 
operating expenditures that are derived or associated with economic activities that qualify as 
environmentally sustainable. 

These indicators will be specified in a separate delegated act which will apply as of 2022. By 
publishing  each  year 
indicators  on  activities  considered 
environmentally  sustainable  according  to  the  EU  Taxonomy,  companies  will  show 
objectively  to  investors  and  the  public  at  large  their  trajectory  towards  environmental 
sustainability. 

their  key  performance 

Companies  will  have  to  report  these  indicators  alongside  other  sustainability  information 
mandated  by  the  Corporate  Sustainability  Reporting  Directive.  The  mandatory  reporting 
standards to  be developed under the  Corporate  Sustainability  Reporting  Directive will fully 
take into account  these indicators, and they will build on the screening criteria and ‘do-no-
significant-harm’ thresholds  of the EU Taxonomy.  In particular, the  sustainability  reporting 
standards developed will include indicators that are aligned with the indicators that financial 
market  participants  will  have  to  report  according  to  the  Sustainable  Finance  Disclosure 
Regulation.  

At the same time, reporting under the proposed Corporate Sustainability Reporting Directive 
will  also  provide  companies  with  the  means  to  show  their  progress  towards  sustainability, 
aside  from  their  degree  of  alignment  with  the  Taxonomy.  In  particular,  companies  should 
present a comprehensive picture of their sustainability impacts and dependencies.  

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The Commission will ensure that reporting standards reflect not only the current Taxonomy-
alignment of a company’s activities, but also its forward-looking business plans, and that the 
standards  facilitate  both  capital  market-based  and  bank-based  finance.  Mandatory  reporting 
under  the  Taxonomy  Regulation  will  apply  from  January  2022  for  the  climate  change 
mitigation and adaptation objectives, and from January 2023 for the other four objectives, as 
agreed by the European Parliament and the Council in the EU Taxonomy Regulation.  

The Commission will explore, including with input from the Platform on Sustainable Finance 
and the European Financial Reporting Advisory Group, appropriate guidance and options for 
how  entities  covered  by  reporting  obligations  set  out  in  the  EU  Taxonomy  Regulation  can 
meaningfully report in the first year of their reporting obligations, taking into account certain 
data gaps. 

VI. 

SUSTAINABILITY PREFERENCES AND FIDUCIARY DUTIES 

The Commission is today introducing the assessment of client’s sustainability preferences in 
existing delegated acts under the Markets in Financial Instruments Directive (MiFID II)17 and 
the  Insurance  Distribution  Directive  (IDD)18,  as  a  top  up  to  the  suitability  assessment. 
Insurance and investment advisers will be required to obtain information not only about the 
client’s  investment  knowledge  and  experience,  ability  to  bear  losses,  and  risk  tolerance  as 
part  of  the  suitability  assessment,  but  also  about  their  sustainability  preferences.  This  will 
ensure that sustainability considerations are taken into account on a systematic basis when the 
advisers assess the range of financial instruments and products in their recommendations to 
clients.  

This  action  will  empower  retail  investors  to  decide  where  and  how  their  savings  should  be 
invested. This  way,  everyone will have a  chance to  make a tangible positive impact  on the 
climate, environment and society if they desire to do so. The change will increase the demand 
for  financial  instruments  and  products  with  sustainable  investment  strategies  and  those  that 
consider adverse impact on sustainability.  

By  amending  existing  rules  on  fiduciary  duties  in  delegated  acts  for  asset  management, 
insurance, reinsurance and investment sectors, the Commission is clarifying the current rules 
to  also  encompass  sustainability  risks  such  as  the  impact  of  climate  change  and 
environmental degradation on the value of investments.  

VII.  CONCLUSION 

The  EU  Taxonomy  Climate  Delegated  Act,  the  proposal  for  the  Corporate  Sustainability 
Reporting Directive outlined in this Communication, as well as the amendments to delegated 
acts  regarding  sustainability  preferences,  fiduciary  duties  and  product  governance  are 

17 Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of 
the European Parliament and of the Council as regards organisational requirements and operating conditions for 
investment firms and defined terms for the purposes of that Directive, OJ L 87, 31.3.2017, p. 1. 
18  Commission  Delegated  Regulation  (EU)  2017/2359  of  21  September  2017  supplementing  Directive  (EU) 
2016/97 of the European Parliament and of the Council with regard to information requirements and conduct of 
business rules applicable to the distribution of insurance-based investment products, OJ L 341, 20.12.2017, p. 8. 

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important steps in the implementation of the existing Action Plan on Financing Sustainable 
Growth and the delivery of the European Green Deal.  

This enabling sustainable finance ecosystem is part of a wider strategy to achieve change and 
ensure  a  just  transition  to  reach  our  sustainability  goals.  They  are  the  building  blocks  to 
increase  transparency  and  provide  tools  for  investors  to  identify  sustainable  investment 
opportunities. They will enable a number of future tools, such as the EU ecolabel  for retail 
financial products and the EU Green Bond Standard to be developed. 

Dialogue,  cooperation  and  strong  partnership  between  authorities,  corporate  and  financial 
actors, social partners, civil society, and the research and academic community will be crucial 
to  further  develop  the  sustainable  finance  toolbox,  including  through  the  Platform  on 
Sustainable Finance. 

Momentum  is  growing  with  many  of  our  international  partners  increasing  ambition  and 
pursuing more sustainable development pathways aligned with the Paris Agreement and other 
environmental  goals.  The  appetite  for  sustainable  products  in  international  markets  is  also 
growing,  offering  more  opportunities  for  sustainable  investments.  Global  convergence  of 
standards  is  essential  to  avoid  fragmented  markets  and  enable  cross-border  investments  to 
help  achieve  the  global  climate  and  environmental  goals.  The  EU  remains  committed  to 
playing  a  leading  role  in  strengthening  worldwide  cooperation  through  the  International 
Platform on Sustainable Finance and other international fora such as the G20 and G7.  

The  updated  Sustainable  Finance  Strategy  to  be  adopted  by  the  Commission  in  June  2021 
will  further  set  out  how  sustainable  finance  will  foster  the  transition  to  a  sustainable  and 
climate-neutral economy.  

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