COMMISSION STAFF WORKING DOCUMENT Enhancing the usability of the EU Taxonomy and the overall EU sustainable finance framework Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions A sustainable finance framework that works on the ground
Date: 2023-06-13
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU environmental policy, EU financing, European standard, carbon neutrality, credit rating, exchange of information, green economy, investment, sustainable development, sustainable finance

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 13.6.2023  SWD(2023) 209 final  COMMISSION STAFF WORKING DOCUMENT Enhancing the usability of the EU Taxonomy and the overall EU sustainable finance framework Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions A sustainable finance framework that works on the ground {COM(2023) 317 final}  
 
 
TABLE OF CONTENTS 
Introduction ................................................................................................................................................. 2 

1.  The foundations of the EU sustainable finance framework ............................................................ 3 

1.1.  The EU Taxonomy sets a common language for the agenda................................................... 4 

1.2.  A comprehensive disclosure regime for non-financial and financial undertakings 
providing investors with necessary information to make sustainable investment choices ............... 6 

1.3.  Tools for companies, market participants and financial intermediaries to develop 
sustainable investment solutions ............................................................................................................ 8 

2.  Usability of the EU sustainable finance framework as a priority ................................................... 9 

3.  Measures enhancing the usability of the EU Taxonomy criteria and disclosures ......................... 9 

4.  Measures enhancing the usability of the wider sustainable finance framework ......................... 13 

4.1.  Measures to support the implementation of the sustainability concepts under the EU 
Taxonomy, the SFDR and the Benchmark Regulation ..................................................................... 14 

Measure 1: Clarification that investments in ‘environmentally sustainable economic activities’ 
within the meaning of the EU Taxonomy can be qualified as a ‘sustainable investment’ within the 
meaning of the SFDR. ............................................................................................................................. 15 

Measure 2: Clarification that passive funds tracking an EU Climate Benchmark fall under the 
scope of Article 9 and are deemed to have sustainable investment as an objective. .............................. 15 

Measure 3: Commission’s future comprehensive assessment of the SFDR. .......................................... 16 

4.2.  Measures to support financial undertakings with their sustainability disclosure 
obligations and to address current ESG data gaps ............................................................................ 17 

Measure 4: Clarification on the use of estimates to assess the taxonomy alignment of companies 
out of the scope or not yet reporting under the Taxonomy Regulation for disclosures under the 
SFDR. 17 

Measure 5: Development of sustainability disclosure requirements for securities not captured 
under the SFDR....................................................................................................................................... 18 

Going forward ........................................................................................................................................... 18 

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Introduction  

Over the past 5 years, the EU has gradually established a comprehensive regulatory framework 
for  sustainable  finance  through  several  milestones.  The  2018  Action  Plan  on  Financing 
Sustainable  Growth1  and  the  2021  Strategy  for  financing  the  transition  to  a  sustainable  economy2 
have put forward an ambitious set of goals in support of the European Green Deal.  

Enhancing  the  usability  of  the  EU  Taxonomy  and  the  wider  sustainable  framework  is  a  key 
priority  and  will  remain  a  core  element  of  the  Commission’s  future  work.  With  the  founding 
pillars  now  in  place,  the  EU  Taxonomy  and  sustainable  finance  tools  are  being  progressively 
onboarded  by  market  players.  The  quality  and  availability  of  sustainability  information  are  also 
expected  to  improve  with  the  implementation  of  the  European  sustainability  reporting  standards 
(ESRS) and the European Single Access Point (ESAP). However, several concerns over usability and 
consistency have come to light that need to be urgently addressed. 

The  Commission  has  already  taken  significant  steps  in  addressing  implementation  challenges 
reported  by  stakeholders.  A  series  of  targeted  measures  and  several  legislative  initiatives  were 
recently  developed  to  clarify  key  concepts  of  the  framework.  These  also  aimed  at  supporting  the 
implementation of complex and interconnected requirements.  

The  Commission  remains  committed  to  continuously  improving  the  regulatory  framework  to 
ensure  the  rules  are  clear,  consistent  and  as  easy  to  implement  as  possible.  This  includes 
clarifying  and  simplifying  the  interplay  between  the  key  concepts,  removing  unnecessary 
administrative  burdens  and  costs,  and  identifying  any  gaps  that  might  prevent  stakeholders  from 
complying with their obligations.  

This  staff  working  document  provides  an  overview  of  the  key  pillars  of  the  regulatory 
framework  and  takes  stock  of  the  recent  actions  taken  to  enhance  the  usability  of  the  EU 
Taxonomy and of the wider sustainable finance framework. 

1  Communication  from  the  Commission  to  the  European  Parliament,  the  European  Council,  the  Council,  the 
European Central Bank, the European Economic and Social Committee and the Committee of the Regions on  
Action Plan: Financing Sustainable Growth, COM (2018) 97 final.  
2 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social  Committee,  the  Committee  of  the  Regions  on  Strategy  for  Financing  the  Transition  to  a  Sustainable 
Economy, COM (2021) 390 final. 

2 

 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1.  The foundations of the EU sustainable finance framework  

The  EU  sustainable  finance  agenda  relies  on  three  pillars:  (1)  the  EU  Taxonomy3;  (2)  several 
disclosure  frameworks  for  non-financial  and  financial  undertakings4;  and  (3)  a  set  of  investment 
tools  to  develop  sustainable  solutions5.  Five  years  after  the  launch  of  the  first  action  plan  for 
sustainable  finance,  the  three  pillars  are  in  place  and  are  providing  for  a  regulatory  environment 
conducive to supporting sustainable investments.  

This section provides an overview of these policy foundations and recent developments.  

Figure 1: The pillars of the EU sustainable finance framework 

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. 
4  These  include  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, and Directive (EU) 2022/2464 of the 
European  Parliament  and  of  the  Council  of  14  December  2022  amending  Regulation  (EU)  No  537/2014, 
Directive  2004/109/EC,  Directive  2006/43/EC  and  Directive  2013/34/EU,  as  regards  corporate  sustainability 
reporting. 
5 These include Commission Delegated Regulation (EU) 2020/1818 of 17 July 2020 supplementing Regulation 
(EU) 2016/1011 of the European Parliament and of the Council as regards minimum standards for EU Climate 
Transition  Benchmarks  and  EU  Paris-aligned  Benchmarks,  and  Proposal  for  a  regulation  of  the  European 
Parliament and of the Council on European green bonds, COM/2021/391 final. 

3 

 
 
 
 
 
                                                           
1.1. The EU Taxonomy sets a common language for the agenda  

The EU Taxonomy established a robust and science-based classification system which provides a 
set of criteria to identify economic activities substantially contributing to the EU’s six environmental 
objectives.  This  common  set  of  criteria  enables  investors  to  share  a  common  understanding  of  the 
environmental  sustainability  impacts  of  their  investments  while  providing  safeguards  against 
greenwashing. The EU Taxonomy also acts as an efficient measuring tool to monitor the degree to 
which investments or economic activities of undertakings are sustainable6.  

The Taxonomy Climate Delegated Act (for climate mitigation and climate adaptation objectives) is 
already  up  and  running  and  covers  a  total  of  107  economic  activities  spanning  over  13  economic 
sectors. The recent adoption of the Taxonomy Environmental Delegated Act7 and of the targeted 
amendments  to  the  Taxonomy  Climate  Delegated  Act8  has  significantly  enhanced  the  taxonomy 
framework  and  expanded  the  potential  of  sustainable  investments.    New  economic  sectors  and 
activities will continue to be added and existing ones refined and updated where needed9.  

Since January 2023, large non-financial undertakings have started to assess and report their alignment 
with the Climate objectives under the Taxonomy Disclosures Delegated Act10. 

Box 1: Observations from recent Taxonomy corporate disclosures (financial year 2022) 

The first indications of early corporate reporting from this year show encouraging signs that the 
EU  Taxonomy  is  increasingly  being  used  by  undertakings  to  signal  their  sustainability 
performance and efforts. As of 17 May 2023, 63% of the STOXX Europe 60011 undertakings have 
already  disclosed  their  taxonomy  eligibility  and  alignment.  Among  these  undertakings,  30%  (178 
companies)  reported  non-zero  values  for  capital  expenditure  (CapEx)  alignment,  23%  (139 
companies)  for  revenue  alignment  and  21%  (127  companies)  for  operating  expenditure  (OpEx) 
alignment. On average, the taxonomy alignment of these companies is around 17% for revenue, 
23% for CapEx and 24% for OpEx12.  

Reporting  figures  also  suggest  that  nearly  two  in  three  companies  that  disclosed  CapEx  eligibility 
reported  a  non-zero  alignment  figure  and  one  in  two  companies  that  disclosed  revenue  eligibility 
reported a non-zero degree of aligned revenue.  

Another  notable  observation  from  recent  reporting  figures  is  that  the  existing  taxonomy  can 
effectively  serve  as  a  powerful  signal  for  companies  in  transition.  A  significant  number  of 
companies are reporting taxonomy-aligned CapEx figures that are materially higher than their aligned 
revenue, especially in high-emitting sectors. Looking at average sector alignment, the sectors with the 
highest  average  CapEx  and  revenue  alignment  numbers  are  the  utilities  (70%  aligned  CapEx,  40% 

6 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. 
7 The Environmental Delegated Act covers the remaining four environmental objectives, i.e.  water and marine 
resources, circular economy, pollution prevention and control and biodiversity. 
8 The amendments expand on economic activities not included in the climate taxonomy so far and make targeted 
changes and clerical corrections to selected existing climate criteria. 
9 The recently proposed Delegated Acts add more than 35 activities spanning over 8 sectors. 
10 Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 
of the European Parliament and of the Council by specifying the content and presentation of information to be 
disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EU concerning environmentally 
sustainable economic activities, and specifying the methodology to comply with that disclosure obligation. 
11  The  STOXX  Europe  600  index  is  composed  of  600  components  representing  large,  mid  and  small 
capitalisation  companies  among  17  European  countries,  covering  approximately  90%  of  the  free-float  market 
capitalisation of the stock market in Europe. 
12 Data based on FY 2022 disclosures up to 17 May 2023; source: Bloomberg. 

4 

 
 
 
 
 
 
 
 
                                                           
aligned revenue) and real estate (25% aligned CapEx, 25% aligned revenue) sectors, followed closely 
by  the  energy  sector  with  average  CapEx  alignment  of  23%,  more  than  three  times  the  average 
aligned revenue for the sector13. This highlights the opportunity for forward-looking signals that the 
taxonomy can provide for companies in sectors that need to decarbonise the most.  

Finally,  data  shows  that  undertakings  high  taxonomy  alignment  (based  on  disclosed  and  estimated 
figures)  are  significantly  overweight  in  funds  with  sustainability-related  characteristics  (Article  8 
SFDR) and objectives (Article 9 SFDR), with substantially  larger weights for those undertakings in 
funds  with  sustainability-related  objectives  compared  to  funds  with  sustainability  characteristics14. 
This  confirms  the  potential  of  the  taxonomy  as  a  critical  tool  to  identify  undertakings  and 
sectors in transition, and for these undertakings to signal their transition finance needs and to 
access finance more broadly.  

Figure 2: Recent taxonomy-alignment data – STOXX 600 undertakings disclosures 

13 Data based on taxonomy-alignment reporting of 455 companies up to 16 May 2023; source: GS SUSTAIN 
Goldman Sachs Global Investment Research.  
14 E.g. as of December 2022, MSCI ACWI companies with  taxonomy aligned revenue of 21-40% were 169% 
overweight in art. 9 SFDR funds and 8% overweight in art. 8 SFDR funds; companies with  taxonomy aligned 
revenue  of  41-60%  were  376%  overweight  in  art.  9  funds  compared  to  50%  in  art  8  funds;  Companies  with 
taxonomy aligned revenue of 81-100% were 451% overweight in art. 9 funds compared to 101% in art 8 funds; 
source: GS SUSTAIN Goldman Sachs Global Investment Research . 

5 

 
 
 
 
 
 
 
 
 
 
 
                                                           
In  parallel,  the  Commission  continues  to  engage  in  international  forums  (G20,  the  International 
Platform on Sustainable Finance (IPSF)) to help  increase the uptake of taxonomy-based approaches 
and support their interoperability. The IPSF has played a key role in this regard by conducting an in-
depth comparison exercise that identifies areas of common ground between certain features of the EU 
and  Chinese  taxonomies.  The  IPSF  will  pursue  these  efforts  by  enriching  the  Common  Ground 
Taxonomy  with  new  economic  sectors  and  activities,  covering  additional  environmental  objectives 
and incorporating other jurisdictions’ taxonomies.    

1.2. A comprehensive disclosure regime for non-financial and financial undertakings 

providing investors with necessary information to make sustainable investment choices 

The EU has put in place a comprehensive disclosure regime impacting the whole financial sector to 
increase  transparency  about  environmental,  social  and  governance  (ESG)  impacts,  risks  and 
opportunities. The key pillars are the Sustainable Finance Disclosure Regulation (SFDR)15; which 
lays  out  sustainability  disclosures  for  financial  market  participants,  financial  advisers  and  certain 
financial products; and the Corporate Sustainability Reporting Directive (CSRD)16 which defines 
the sustainability reporting rules for large companies and  listed SMEs.  The frameworks also ensure 
the proportionality of sustainability reporting requirements, especially regarding SMEs. 

The  disclosure  rules  integrate  the  taxonomy  disclosures  and  adopt  a  double  materiality 
approach.  This  involves  the  systematic  integration  of  both  financially  material  sustainability  risks 
(outside-in) and sustainability impacts (inside-out) in financial decision-making processes.  

  The  CSRD  revised  and  strengthened  the  sustainability  reporting  rules  for  companies 
introduced  by  the  Non-Financial  Reporting  Directive  (NFRD)  and  widened  the  scope  of 
companies  that  will  need  to  report.17  It  establishes  the  requirement  for  companies  to  report 
standardised  sustainability  information  according  to  European  sustainability  reporting 
standards  (ESRS).  The  ESRS  will  also  provide  crucial  information  about  the  degree  of 
sustainability  of  investees’  activities  to  investors  that  need  to  report  under  the  SFDR,  the 
Benchmark Regulation (BMR) and the Capital Requirements Regulation/Directive (CRR/D). 

  The  SFDR  requires  financial  market  participants  (FMPs)  and  financial  advisers  to  disclose 
the  sustainability  risks  and  impacts  of  their  investment  products,  activities  and processes  to 
end-investors  since  March  2021.  It  introduced  a  series  of  sustainability-related  disclosure 
obligations  at  the  level  of  both  financial  market  participants  and  financial  products.  This 
includes an obligation for financial products with sustainability-related characteristics (Article 
8  SFDR)  and  objectives  (Article  9  SFDR)  to  regularly  assess  and  report  their  degree  of 
alignment with the taxonomy. The SFDR Delegated Act18, which applies since January 2023, 

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. 
16  Directive  (EU)  2022/2464  of  the  European  Parliament  and  of  the  Council  of  14  December  2022  amending 
Regulation  (EU)  No  537/2014,  Directive  2004/109/EC,  Directive  2006/43/EC  and  Directive  2013/34/EU,  as 
regards corporate sustainability reporting. 
17  The  NFRD  covered  approximately  11,700  companies  and  groups  across  the  EU.  The  CSRD  increased  the 
number of firms subject to EU sustainability reporting requirements to more than 49,000. 
18  Commission  Delegated  Regulation  (EU)  2022/1288  of  6  April  2022  supplementing  Regulation  (EU) 
2019/2088  of  the  European  Parliament  and  of  the  Council  with  regard  to  regulatory  technical  standards 
specifying  the  details  of  the  content  and  presentation  of  the  information  in  relation  to  the  principle  of  ‘do  no 
significant  harm’,  specifying  the  content,  methodologies  and  presentation  of  information  in  relation  to 
sustainability indicators and adverse sustainability impacts, and the content and presentation of the information 
in relation to the promotion of environmental or social characteristics and sustainable investment objectives in 
pre-contractual documents, on websites and in periodic reports. 

6 

 
 
 
 
 
 
                                                           
increased  the  quality  and  comparability  of  information  provided  by  FMPs  on  the 
sustainability risks, characteristics and impacts of financial products in the EU. In Q1 2023, 
net assets in funds promoting environmental characteristics or having sustainable investment 
as their objective reached EUR 4.8 trillion, up from EUR 3.8 trillion in mid-202019. Data also 
shows  that  these  funds  continue  to  attract  significant  flows,  with  equity  funds  promoting 
environmental  characteristics  or  having  sustainable  investment  as  their  objective  receiving 
nearly four times the cumulative inflows versus non-ESG funds between 2019 and 2022.20 

  The  Benchmark  Regulation  (BMR)  introduced  disclosure  requirements21  for  all  EU 
benchmarks with ESG factors22, mandating administrators to disclose whether they integrate 
ESG in their benchmark design, and if so how. BMR also requires benchmark administrators 
of EU Climate Benchmarks to regularly report, as part of their benchmark statements, on the 
performance  of  their  benchmarks  against  a  set  of  sustainability-related  Key  Performance 
Indicators (KPIs).  

  The  sustainability  amendments  to  the  Markets  in  Financial  Instruments  Directive 
(MiFID)23  and  Insurance  Distribution  Directive  (IDD)24  introduced  retail  investors’ 
sustainability  preferences  as  part  of   the suitability  test  in  investment  and  insurance  advice. 
The new rules, applicable since August 2022, have given retail investors the opportunity to 
set  minimum  sustainability  requirements  for  their  investments,  which  can  be  expressed  in 
relation  to  the  taxonomy-alignment  of  products.  Distributors  will  rely  on  products’ 
sustainability-related  information  made  available  under  the  SFDR  to  match  retail  investors’ 
sustainability preferences. 

  The recently proposed European Single Access Point (ESAP) Regulation25 complements the 
disclosure  initiatives  by  creating  an  EU-wide  mechanism  offering  easily  accessible  and 
digitally  usable  information  based  on  companies’  public  reporting  requirements.  This 
proposal, on which provisional agreement was reached between the European Parliament and 
the Council in May 2023, will improve access to ESG information, especially information to 
be reported under CSRD, including taxonomy-related information within such reporting.  

  The recently proposed Regulation on transparency and integrity of ESG rating activities 
aims at  increasing clarity  on the operations of ESG rating providers, in particular regarding 
the methodologies, objectives, characteristics and data sources. This proposal will also foster 
accessibility  and  promote  innovation  in  the  market,  as  well  prevent  and  mitigate  potential 
risks associated with conflicts of interest.   

19 Source: European Commission based on Morningstar. 
20 Source: GS SUSTAIN Goldman Sachs Global Investment Research. 
21  Commission  Delegated  Regulation  (EU)  2020/1816  of  17  July  2020  supplementing  Regulation  (EU) 
2016/1011 of the European Parliament and of the Council as regards the explanation in the benchmark statement 
of how environmental, social and governance factors are reflected in each benchmark provided and published. 
22 Except for interest rate and currency-related benchmarks. 
23 Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial 
instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (recast). 
24  Directive  (EU)  2016/97  of  the  European  Parliament  and  of  the  Council  of  20  January  2016  on  insurance 
distribution (recast). 
25 Proposal for a Regulation of the European Parliament and the Council establishing a European single access 
point  providing  centralised  access  to  publicly  available  information  of  relevance  to  financial  services,  capital 
markets and sustainability, COM/2021/723 final. 

7 

 
 
 
 
 
 
 
 
 
 
                                                           
1.3. Tools  for  companies,  market  participants  and  financial  intermediaries  to  develop 

sustainable investment solutions 

The third building block is a set of investment tools which includes benchmarks and standards. These 
aim to support financial market participants in their efforts to align their investment strategies with the 
EU’s climate and environmental goals. 

  The  EU  climate  benchmarks26,  i.e.,  the  EU  Paris-aligned  Benchmark  (PAB)  and  the  EU 
introduced  under  the  EU  Benchmark 
Climate  Transition  Benchmark  (CTB),  were 
Regulation27.  Their  methodologies  rely  on  minimum  technical  requirements  focused  on 
decarbonisation  trajectory  and  activity  exclusions.  Exclusions  encompass  companies  that 
significantly harm one or more environmental objectives set out in the Taxonomy Regulation. 
PABs and CTBs are designed to reorient investment towards ESG opportunities rather than 
focusing  on  simple  risk  reduction,  in  line  with  the  objectives  of  a  transition  to  a  climate-
resilient  economy.  Since  their  introduction,  assets  under  management  of  financial  products 
referencing a PAB or CTB benchmark have already reached an estimated EUR 116 billion in 
202328.  PABs  and  CTBs  have  also  been  recognised  by  major  investment  institutions, 
including public institutions and non-EU institutions29, as solid tools to help investors tailor 
their portfolios to follow a decarbonisation pathway.  

  The European green bonds standards initiative is a voluntary standard to help scale up and 
raise the environmental ambitions of the green bond market30. It sets a gold standard for how 
companies  and  public  authorities  can  use  green  bonds  to  raise  funds  on  capital  markets  to 
finance  ambitious 
investments,  while  meeting  high  sustainability 
requirements and protecting investors. It will also help investors to easily assess, compare and 
verify that their investments are sustainable and ensure that funds are allocated to taxonomy-
aligned economic activities, thereby reducing greenwashing risks.31  

large-scale  green 

26  Commission  Delegated  Regulation  (EU)  2020/1818  of  17  July  2020  supplementing  Regulation  (EU) 
2016/1011  of  the  European  Parliament  and  of  the  Council  as  regards  minimum  standards  for  EU  Climate 
Transition Benchmarks and EU Paris-aligned Benchmarks. 
27 Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending 
Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and 
sustainability-related disclosures for benchmarks. 
28 Source: Financial Times, “Why carbon emissions reports need handling with care”, 30 May 2023. 
29 For example, the Danish central bank, New Zealand’s Superannuation Fund, Taiwan’s largest public pension 
fund and the pension funds of the German states of Baden-Württemberg, Brandenburg, Hesse and North Rhine-
Westphalia. 
30  Proposal  for  a  regulation  of  the  European  Parliament  and  of  the  Council  on  European  green  bonds, 
COM/2021/391 final. Political agreement reached by co-legislators on 28 February 2023. 
31  According  to  data  from  the LGX DataHub,  120  sustainable  bonds  currently  refer  to  the  Taxonomy  in  post-
issuance documentation, of which about 40% claim to be fully taxonomy-aligned, while about 60% claim some 
partial taxonomy alignment. 

8 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
2.  Usability of the EU sustainable finance framework as a priority  

Enhancing the usability of the Sustainable Finance framework is of key importance to ensure proper 
adherence  of  stakeholders.  The  first  year  of  reporting  under  the  Taxonomy  Disclosures  Delegated 
Act32  has  shown  that  some  undertakings  are  facing  difficulties  with  demonstrating  and  reporting 
taxonomy  alignment.  These  implementation  challenges  are  mainly  due  to  a  lack  of  resources  to 
integrate these new aspects in reporting systems, but there are also several usability issues linked to 
the criteria and test requirements that are urgent to address.  

Beyond the EU Taxonomy, stakeholders are also reporting implementation challenges regarding key 
concepts and reporting obligations under the wider sustainable finance framework such as the SFDR, 
the BMR and the MiFID/IDD sustainability preferences rules. While these issues have not prevented 
the  general  mainstreaming  of  the  EU  Taxonomy  and  sustainable  finance  tools,  they  could  hinder 
market actors’ adherence to the sustainable finance rules and lower the framework’s potential.  

The Commission is committed to addressing these concerns and taking the necessary actions to ensure 
the framework works on the ground. This involves providing market actors with regular clarifications 
and guidance, ensuring that the tools are easy to use, that the key sustainability concepts are clear and 
well connected and that any reporting duplication is removed. This work continues to be supported by 
the  European  supervisory  authorities  (the  ESAs,  i.e.  the  European  Banking  Authority  (EBA),  the 
European  Securities  and  Markets  Authority  (ESMA)  and  the  European  Insurance  and  Occupational 
Pensions Authority (EIOPA)) and the Platform on Sustainable Finance (PSF). Information on the key 
areas for further improvement is included in the last Section of this document (‘Going forward’). 

As  a  first  step,  the  Commission  has  already  started  to  address  key  implementation  issues  raised  by 
stakeholders  and  taken  important  steps  to  enhance  the  usability  of  the  framework.  These  are 
summarised in Section 3 and 4.  

3.  Measures enhancing the usability of the EU Taxonomy criteria and disclosures  

The EU Taxonomy being a novel and complex instrument, it is understandable that undertakings have 
been  facing  difficulties  in  understanding  and  applying  the  criteria  in  this  early  phase  of 
implementation.  In  addition,  the  new  KPIs  under  the  Taxonomy  Disclosures  Delegated  Act  are  the 
first  of  their  kind  in  the  non-financial  disclosure  framework,  requiring  additional  expertise  and 
resources from in-scope entities.  

To support stakeholders in their implementation efforts, the Commission has been providing regular 
guidance on the interpretation and application of certain criteria and disclosures. In addition, the 
Commission  has recently  launched  a  series  of  online  tools  and  guides to  help users  navigate the 
criteria and fill their reporting templates. These should save stakeholders time and resources when 
assessing and reporting their taxonomy alignment.  

These  documents  and  tools  are  gathered  on  the  new  EU  Taxonomy  Navigator  website33.  They 
should help address some of the difficulties encountered by stakeholders when trying to cope with the 
test requirements and obligations.  

32 Non-financial undertakings falling under the scope of the CSRD were required to start reporting on taxonomy 
eligibility (i.e. whether their activities are covered in the EU Taxonomy) since January 2022 and on  taxonomy 
alignment (i.e. whether the taxonomy eligible activities comply with the technical screening criteria defined in 
the taxonomy delegated acts) since January 2023.  
33 https://ec.europa.eu/sustainable-finance-taxonomy/ 

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Overview of the Commission’s recent measures to support the implementation of the taxonomy 
criteria and disclosures 

  Commission notices (frequently asked questions) providing legal guidance and technical 

clarifications to undertakings  

The first set of frequently asked questions (FAQs)  published in April and July 2021 focused on the 
taxonomy and its reporting framework in general. Since then, the FAQs have become more and more 
specific in response to questions from stakeholders and Member States to the Commission.   

As  of  January  2022,  non-financial  undertakings  were  required  to  start  reporting  on  taxonomy 
eligibility  (i.e.,  whether  their  activities  are  covered  in  the  EU  Taxonomy).  In  response  to  this,  the 
Commission  published  a  dedicated  guidance  document  and  notice  to  clarify  the  provisions  of  the 
Taxonomy  Disclosures  Delegated  Act.  The  aim  was  to  answer  technical  questions  that  market 
participants had submitted to the Commission concerning eligibility assessments.   

As of 1 January 2023, non-financial undertakings are required to report on taxonomy alignment (i.e., 
whether  the  taxonomy  eligible  activities comply  with  the  technical  screening  criteria  defined  in  the 
Taxonomy Delegated Acts). To prepare for these reporting obligations, the market identified a set of 
technical questions centered on the interpretation of the technical screening criteria in the Taxonomy 
Climate  Delegated  Act.  In  addition,  the  Commission  published  further  a  draft  legal  interpretative 
guidance  for  non-financial  undertakings  on  taxonomy  alignment  reporting  in  accordance  with  the 
Taxonomy  Disclosures  Delegated  Act.  To  alleviate  undue  reporting  burdens,  the  Commission  will 
clarify  in  the  final  version  of  this  guidance  how  activities  that  are  not  material  for  the  business  of 
reporting undertakings should be reported in their KPIs34. 

The  Commission  plans  to  adopt  another  guidance  document  by  the  end  of  this  year.  The  new 
document will focus on taxonomy alignment reporting obligations for financial undertakings, which 
will be required to report their green assets ratio (GAR) and other KPIs as of 1 January 2024.   

The  box  below  provides  an  overview  of  all  the  FAQs  documents  that  the  Commission  has  already 
published.   

34  The  objective  is  to  clarify  that,  while  not  being  exempted  from  their  reporting  requirements  under  the 
Taxonomy  Disclosures  Delegated  Act,  undertakings  are  not  obliged  to  perform  a  Taxonomy-assessment  of 
economic  activities  that  are  not  material  for  their  business  and  for  which  they  lack  evidence  or  data  to prove 
compliance  with the EU Taxonomy. This applies only to these specific economic activities. In the  absence of 
such an assessment, undertakings should not, however, report those activities as Taxonomy-aligned.   

10 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Box 2: Taxonomy FAQ documents  

April 2021  

  What is the EU taxonomy and how will it work in practice?35  

July 2021  

  What is the EU taxonomy Article 8 Delegated Act and how will it work in practice?36  

December 2021  

  How  should  financial  and  non-financial  undertakings  report  taxonomy-eligible  economic 
activities  and  assets  in  accordance  with  the  Taxonomy  Regulation  Article  8  Disclosures 
Delegated Act?37  

February 2022  

  Commission  Notice  on  the  interpretation  of  certain  legal  provisions  of  the  Taxonomy 
Regulation  Article  8  Disclosures  Delegated  Act  on  the  reporting  of  eligible  economic 
activities and assets38  

  FAQ on the Taxonomy Complementary Climate Delegated Act39  

December 2022:   

  Draft Commission Notice on the interpretation and implementation of certain legal provisions 
of  the  EU  Taxonomy  Climate  Delegated  Act  establishing  technical  screening  criteria  for 
economic  activities  that  contribute  substantially  to  climate  change  mitigation  or  climate 
change adaptation and do no significant harm to other environmental objective40  

  Draft Commission Notice on the interpretation and implementation of certain legal provisions 
of  the  Disclosures  Delegated  Act  under  Article  8  of  EU  Taxonomy  Regulation  on  the 
reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets41  

May 2023:  

  Commission  Notice  on  the  interpretation  and  implementation  of  certain  legal  provisions  of 
the EU Taxonomy Regulation and its link to the Sustainable Finance Disclosure Regulation 
(SFDR)42 

An  FAQs  repository  is  available  on  the  EU  Taxonomy  Navigator  website.  Users  can  search  for 
specific questions that are of interest to them and filter the questions by organisation type and FAQ 
document. In the future, the Commission aims to further improve the repository’s filtering features to 
include options such as filtering by delegated act or by sector of activities.  

  EU Taxonomy Compass  

35 https://finance.ec.europa.eu/system/files/2021-04/sustainable-finance-taxonomy-faq_en.pdf 
36 https://finance.ec.europa.eu/system/files/2021-07/sustainable-finance-taxonomy-article-8-faq_en.pdf 
37https://finance.ec.europa.eu/system/files/2022-01/sustainable-finance-taxonomy-article-8-report-eligible-
activities-assets-faq_en.pdf . 
38 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52022XC1006(01) . 
39 https://ec.europa.eu/commission/presscorner/detail/en/qanda_22_712 . 
40 https://ec.europa.eu/finance/docs/law/221219-draft-commission-notice-eu-taxonomy-climate.pdf . 
41 https://ec.europa.eu/finance/docs/law/221219-draft-commission-notice-disclosures-delegated-act-article-8.pdf 
42https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-
activities_en#faqs. 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
The  EU Taxonomy Compass43 is an online tool that  enables users to search for economic activities 
covered in the Climate Delegated Act and directly access their respective technical screening criteria. 
The format  of the Taxonomy  Compass  aims  to  make  the  criteria easier  to  use by  enabling  users  to 
check: (i) which activities are included in the EU Taxonomy (i.e. which are taxonomy eligible); (ii) 
which objectives they substantially contribute to; and (iii) what criteria have to be met for activities to 
be considered taxonomy aligned. For instance, the tool includes a filtering option that users can adjust  
to  only  see  enabling  and/or  transitional  activities.  In  addition,  the  text  of  the  technical  screening 
criteria  includes  hyperlinks  to  EU  regulations  and  directives  that  are  mentioned,  enabling  users  to 
consult  the  relevant  pieces  of  EU  legislation  while  familiarising  themselves  with  the  taxonomy 
criteria.    

The  EU  Taxonomy  Compass  is  used  in  the  market  as  a  basis  for  undertakings’  reporting.  The 
Taxonomy  Compass’s  content  can  be  downloaded  in  Excel  and  JSON  format,  enabling  users  to 
embed the compass in their internal systems.   

In the future, the Commission plans to extend the EU Taxonomy Compass to also cover the activities 
under  the  other  environmental  objectives  (following  the  adoption  of  the  Taxonomy  Environmental 
Delegated Act), as well as amendments to the Taxonomy Climate Delegated Act.   

  EU Taxonomy Calculator 

The EU Taxonomy Calculator44 is an interactive tool to show non-financial undertakings in a step-by-
step  guide  how  to  determine  their  taxonomy  eligibility  and  alignment  ratios.  The  tool  guides  users 
through seven main steps45 to calculate their turnover, CapEx and OpEx KPIs and automatically fills 
in  the  respective  reporting  templates  included  in  Annex  II  to  the  Taxonomy  Disclosures  Delegated 
Act.   

The Taxonomy Calculator is focused for now on the objective of climate change mitigation. However, 
the Commission plans to extend the tool to cover the other remaining environmental objectives of the 
EU Taxonomy.   

  EU Taxonomy User Guide  

The EU Taxonomy User Guide46 aims to bring the EU Taxonomy closer to stakeholders who may not 
be experts in sustainable finance. The user guide offers a step-by step guide to help non-financial and 
financial  undertakings  assess  their  taxonomy  eligibility  and  alignment.  It  further  exemplifies  these 
steps  through  12  use  cases  that  range  from  ‘which  of  the  activities  performed  by  my  company  are 
covered  by  the  EU  Taxonomy?’  to  ‘how  can  the  EU  Taxonomy  help  my  company  to  define  and 
disclose a new credible low carbon and/or adaptation strategy?’. 

Figure 3: Overview of the coverage of use cases  

43  https://ec.europa.eu/sustainable-finance-taxonomy/taxonomy-compass/the-compass . 
44  https://ec.europa.eu/sustainable-finance-taxonomy/wizard . 
45 From identifying the sectors/activities the undertaking operates in to determining the percentage of substantial 
contribution alignment. 
46 https://ec.europa.eu/sustainable-finance-taxonomy/home . 

12 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
4.  Measures enhancing the usability of the wider sustainable finance framework  

Beyond  the  EU  Taxonomy,  the  implementation  of  the  different  sets  of  disclosures  and  tools  has 
helped increase the transparency and comparability of sustainable financial products in  recent years. 
However, stakeholders have also reported several difficulties when applying key concepts, definitions 
and  disclosure  requirements  under  the  wider  sustainable  finance  framework  due  to  usability  and 
sequencing issues within the framework. These can be explained by the pace at which the framework 
was developed in order to ensure the timely implementation of the European Green Deal’s objectives, 
which resulted in some misalignments between the different legislative pieces. These usability issues 
have slowed down  implementation progress and are therefore urgent to address. 

The  Commission  has  recently  taken  important  steps  to  address  implementation  challenges 
reported by stakeholders.  

First,  the  Commission  provided  clarifications  regarding  the  implementation  and  interplay 
between  the  sustainability  concepts  under  the  EU  Taxonomy,  the  SFDR  and  the  Benchmark 
Regulation. More specifically,  recent  guidance interpreted  the  rules  to  provide  a  ‘safe  harbour’  for 
taxonomy-investment  to  be  automatically  qualified  as  ‘sustainable  investment’  under  the  SFDR,  as 
well  as  a  ‘safe  harbour’  for  passive  funds  tracking  an  EU  climate  benchmark  to  be  automatically 
qualified  as  a  ‘product  with  sustainable  investment  as  its  objective’47.  The  Commission  also 
announced that it is currently conducting a comprehensive assessment of the SFDR disclosure regime 
to address key interpretive and usability issues reported by stakeholders and ensure it plays its part in 
tackling greenwashing. More details on these measures are provided in Section 4.1 below.  

Second,  the  Commission  addressed  two  important  ESG  data  gaps  in  the  framework.  The 
Commission  clarified  the  cases  in  which  FMPs  can  rely  on  estimates  for  their  taxonomy-related 

47 i.e., financial products falling under Article 9 of the SFDR.  

13 

 
 
 
 
 
 
 
 
                                                           
disclosures under the SFDR, and committed to developing sustainability disclosure requirements for 
securities not currently covered under the SFDR48.   

4.1. Measures  to  support  the  implementation  of  the  sustainability  concepts  under  the  EU 

Taxonomy, the SFDR and the Benchmark Regulation   

The EU Taxonomy, the SFDR and the EU climate benchmarks under the BMR are closely interlinked 
and  are  intended  to  complement  each  other  to  form  a  coherent  set  of  disclosures,  criteria  and 
investment tools. It is therefore important that the frameworks work well together to ensure that the 
labels and criteria provide comfort and legal certainty to users. Consistency is also necessary to ensure 
that investors can properly compare and understand the sustainability features of financial products in 
the EU.   

Box 3: the interlinkages between the SFDR, EU Taxonomy and EU Climate Benchmarks  

The EU Taxonomy Regulation, the SFDR and the BMR have introduced three different approaches to 
defining sustainability that  have become central concepts of the EU sustainable  finance framework. 
The taxonomy details what can be considered as  environmentally sustainable economic activities, 
while the SFDR defines sustainable investment and the BMR sets sustainability criteria for its two 
Climate Benchmarks, i.e., the EU Climate Transition Benchmark (CTB) and the EU Paris-aligned 
Benchmark (PAB).  

In  addition  to  introducing  a  definition  of  sustainability,  the  SFDR  is  a  transparency  regime  for 
financial  market  participants  and  advisors  in  which  the  taxonomy  disclosures  and  EU  Climate 
Benchmarks  feed  into  to  ensure  the  sustainability-related  disclosures  for  financial  products  rely  on 
criteria:  
science-based 

  SFDR  –  Taxonomy  interactions:  All  financial  products  promoting  environmental 
characteristics49 or having sustainable investment as their objective50 are required to regularly 
disclose their alignment with the EU Taxonomy. This provides FMPs, financial advisers and 
end-investors with a useful tool to  determine and monitor the degree of sustainability of an 
investment.  

  SFDR  –  EU  climate  benchmarks  interactions:  Under  SFDR  Article  9(3),  EU  climate 
benchmarks are referred to as a robust investment strategy for funds having as their objective 
a reduction in carbon emissions.  The PAB and CTB are therefore useful and reliable labels 
for investment products pursuing such an objective.  

The  EU Taxonomy  and  EU  climate  benchmarks  therefore  complement the  SFDR  by  increasing  the 
comparability  between  financial  products,  providing  tools  to  develop  and  monitor  environmental-
focused investment strategies,  and  fighting  greenwashing.  However,  stakeholders  pointed  to  several 
operational  difficulties  when  applying  these  frameworks  simultaneously  due  to  legal  uncertainties 
regarding the status of investments in taxonomy aligned economic activities and of products tracking 
EU climate benchmarks under the SFDR. Financial advisers and investors also flagged some concerns 
regarding the comparability of the disclosures and concepts between the three frameworks.   

48  Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  amending  Regulations  (EU) 
2017/1129,  (EU)  No  596/2014  and  (EU)  No  600/2014  to  make  public  capital  markets  in  the  Union  more 
attractive for companies and to facilitate access to capital for small and medium-sized enterprises. 
49 Financial products falling under Article 8 SFDR. 
50 Financial products falling under Article 9 SFDR. 

14 

 
 
 
 
 
 
 
 
                                                           
Overview of the Commission’s recent measures to address these key usability issues:  

Measure 1: Clarification that investments in ‘environmentally sustainable economic activities’ within 
the meaning of the EU Taxonomy can be qualified as a ‘sustainable investment’ within the meaning of 
the SFDR.   

Due  to  the  absence  of  a  clear  legal  link  between  what  constitutes  an  environmentally  sustainable 
economic  activity  under  the  EU  Taxonomy  and  what  constitutes  sustainable  investment  under  the 
SFDR, FMPs were uncertain of whether an investment in a taxonomy aligned economic activity could 
be automatically deemed as sustainable investment under the SFDR. This lack of clarity hindered the 
objective of the EU Taxonomy, i.e. setting a common language to define sustainability throughout the 
whole regulatory framework.  

This  has  resulted  in  unintended  and  unnecessary  burdens  for  FMPs  that  are  including  taxonomy 
aligned  investments in  products falling  under  Article  8  or  Article  9  SFDR. These investments  were 
subject to a double assessment under both the EU Taxonomy and the SFDR which could discourage 
FMPs from using the taxonomy framework for portfolio construction. Distributors have also pointed 
out that retail investors struggled to understand and compare the concepts of  sustainable investment 
and taxonomy aligned due to the complexity of these terms and the lack of clear correlation between 
them.  

To remedy this, the Commission has provided guidance clarifying that there is a safe harbour 
for  taxonomy  aligned  investments  under  the  SFDR  in  its  latest  taxonomy  FAQ  document 
published  on  12  June  202351.  The  FAQ  document  clarifies  that  investments  in  taxonomy  aligned 
‘environmentally  sustainable’  economic  activities  can  be  automatically  qualified  as  ‘sustainable 
investment’  under  the  SFDR.  However,  if  an  FMP  invests  in  an  undertaking  with  some  degree  of 
taxonomy-alignment through a funding instrument that does not specify the use of proceeds, such as a 
general  equity  or  debt,  the  FMP  would  still  need  to  check  additional  elements  under  the  SFDR  if 
she/he wants to consider the whole investment in that undertaking as sustainable investment. 

This clarification intends to simplify and encourage the use of the taxonomy framework as a base for 
a  common  understanding  of  what  environmental  sustainability  means  in  EU  financial  products  and 
use of proceeds instruments. It also aims to address the implementation challenges mentioned above 
by increasing the comparability  of sustainability-related disclosures for retail investors and bringing 
consistency between two key legislative acts of the EU sustainable finance framework.  

Measure 2: Clarification that passive funds tracking an EU Climate Benchmark fall under the scope 
of Article 9 and are deemed to have sustainable investment as an objective.  

Despite the legal link between the SFDR and the EU climate benchmarks under SFDR Article 9(3), 
there are a few technical differences between the requirements for PAB and CTBs and the definition 
of ‘sustainable investment’ under the SFDR which have caused confusion among market participants 
regarding the status of passive financial products tracking a PAB/CTB under the SFDR52.  

This  unintended  misalignment  between  the  two  frameworks  has  hindered  the  objectives  of  the  EU 
climate  benchmarks within financial markets,  i.e. to provide comfort and certainty to their users. In 

51Commission Notice on the interpretation and implementation of certain legal provisions of the EU Taxonomy 
Regulation and its link to the Sustainable Finance Disclosure Regulation (SFDR): 
https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en#faqs 
52 This refers to the few misalignments between the principal adverse impacts under the SFDR (as defined in the 
Annex 1 of the Delegated Regulation (EU) 2022/1288) and the exclusions under the  EU Climate Benchmarks 
(as defined under the Article 12 of the Delegated Regulation (EU) 2020/1818). 

15 

 
 
 
 
 
                                                           
fact,  the  lack  of  legal  clarity  has  caused  serious  uncertainty  over  the  ability  of  PAB/CTB  index-
tracking  funds  to  fall  under  Article  9  SFDR  and  led many  of  these  funds  to  declassify  to  Article  8 
SFDR  in  the  last  quarter  of  202253.  The  PABs/CTBs  remain  for  now  the  only  currently  available 
sustainability label in the area of financial services at EU level.  

The  Commission  has  therefore  provided  guidance  so  that  a  safe  harbour  is  provided  for  passive 
funds tracking an EU Climate Benchmark to automatically be considered as making sustainable 
investments under the SFDR in its SFDR Q&A published in April 202354.  

In this guidance, the Commission considered that the limited discrepancies between the ESG criteria 
for sustainable investment under the SFDR and the exclusions under the PAB/CTB do not translate in 
differences in environmental, social or governance ambitions and performance and therefore do not 
imply  that  the  PAB/CTB  methodology  is  incompatible  with  the  SFDR  concept  of  sustainable 
investment.  

Measure 3: Commission’s future comprehensive assessment of the SFDR. 

In  addition  to  the  few  misalignments  between  the  SFDR,  the  EU  Taxonomy  and  the  EU  climate 
benchmarks, market actors have expressed concerns about the applicability and usability of specific 
obligations  and  definitions  under  the  SFDR  framework  itself.  While  the  SFDR  was  meant  as  a 
disclosure  regime,  the  market  has  been  using  it  in  a  different  way,  namely  as  a  labelling  scheme. 
Since  the  existing  definitions  are  not  fit  for  that  purpose,  the  misuse  of  the  Regulation  has  created 
issues, including concerns of greenwashing risks and legal uncertainty  as to how some fundamental 
concepts should be understood and applied.  

The Commission has therefore announced a comprehensive assessment of the implementation of 
the SFDR framework55. The exercise will mainly focus on assessing the shortcomings of the SFDR 
to  improve  legal  certainty,  and  to  enhance  its  usability  and  role  in  mitigating  greenwashing.  The 
assessment will also consider the interactions with other related sustainable finance legislations, like 
the  Taxonomy  Regulation,  the  Benchmark  Regulation,  the  MiFID/IDD  sustainability  amendments 
and  the  CSRD.  The  assessment  will  look  at  improving  the  coherence  within  the  framework  and 
ensuring the data flows effectively throughout the value chain.  

The Commission is currently preparing the ground to launch an open public consultation  in autumn 
2023 to seek feedback from the financial industry and other stakeholders. In parallel, workshops with 
the industry and other stakeholder groups will be organised.  

The issues addressed by the two safe harbours (measures 1 and 2) are without prejudice to the future 
SFDR  assessment.  In  parallel,  the  ESAs  are  consulting  on  the  revision  of  the  SFDR  Regulatory 
Technical  Standards56  (RTS)  until  early  July  2023  and  will  provide  the  Commission  with  proposed 
changes to the disclosure regime in the autumn.  

53 Source: Morningstar. 
54  Commission’s  answers  to  questions  on  the  interpretation  of  Regulation  (EU)  2019/2088,  submitted  by  the 
European  Supervisory  Authorities  on  9  September  2022,  link  here.  The  ESAs  have  also  consolidated  all  past 
Q&A documents related to the SFDR, link here. 
55 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions on Long-term competitiveness of the EU: looking beyond 
2030, COM(2023) 168 final.  
56 https://www.esma.europa.eu/press-news/consultations/joint-consultation-review-sfdr-delegated-regulation . 

16 

 
 
 
 
                                                           
4.2. Measures  to  support  financial  undertakings  with  their  sustainability  disclosure 

obligations and to address current ESG data gaps  

Financial  undertakings  are  faced  with  different  sets  of  disclosure  obligations  under  the  Taxonomy 
Disclosures Delegated Act, the SFDR, the Climate Benchmark Delegated Regulation, the CSRD and 
the Capital Requirements Regulation and Directive (CRR/D). The ability of financial undertakings to 
cope with these requirements hinges on the consistency and quality of information made available by 
financial and non-financial undertakings under the EU sustainable finance framework. 

Some  sequencing  issues  between  ESG  disclosure  obligations  for  non-financial  and  for  financial 
undertakings have made it difficult for the latter to satisfy their own reporting obligations. The bulk of 
these  misalignments  is  now  being  gradually  resolved  with  time  and  through  the  elaboration  of  the 
ESRS. This will enhance access to sustainability-related information from entities within the scope of 
the EU regulatory framework. 

However, some data gaps will remain even after the implementation of the ESRS, especially for 
accessing sustainability-related information from entities or financial products out of the scope of the 
EU regulatory framework. To help address these ESG data availabilities issues, the Commission 
has recently adopted two measures: 

Measure 4: Clarification on the use of estimates to assess the taxonomy alignment of companies out 
of the scope or not yet reporting under the Taxonomy Regulation for disclosures under the SFDR. 

Under the  SFDR  Delegated  Act57,  financial  undertakings  have  been  required  to  regularly  report the 
taxonomy alignment of their financial products with environmental characteristics or objectives since 
January 2022. Collecting the necessary information has been particularly challenging for FMPs given 
that non-financial companies have only started disclosing their taxonomy ratios from 2023 under the 
Taxonomy Disclosures Delegated Act. This is turn has been affecting the ability of financial advisors 
to properly consider investors’ sustainability preferences under MiFID and IDD.  

Now that companies are gradually starting to publish their taxonomy figures, this data gap is expected 
to close for investments in EU entities in scope. However, stakeholders reported that there was still a 
lack of clarity on how FMPs can cope with their  taxonomy-related disclosure obligations under the 
SFDR  Delegated  Act  in  cases  where  companies  are  either  not  yet  reporting  under  the  Taxonomy 
Disclosures Delegated Act or are out of its scope.  

To  address  this,  the  Commission  has  clarified  that  the  use  of  complementary  (i.e.  additional) 
assessments  and  estimates  for  companies  not  in  scope  or  not  yet  reporting  under  the 
CSRD/Taxonomy  Regulation  is  permitted. The use  of  estimates  is  only  permitted in  cases  where 
FMPs  cannot  reasonably  access  information  about  economic  activities  carried  out  by  undertakings 
that are not reporting (or not reporting yet) under the Taxonomy Disclosures Delegated Act, such as 
unlisted SMEs. This clarification was provided in the SFDR Q&A58 published in April 2023. The aim 
is  to  simplify  the  disclosure  obligations  and  alleviate  burdens  on  both  companies  and  FMPs  when 
facing difficulties in accessing sustainability data.  

57 Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022. 
58 Annex to Commission Decision of 13 May 2022 on the adoption of the answers to be provided to questions 
submitted  by  the  European  Supervisory  Authorities  under  Article  16b(5)  of  Regulation  (EU)  No  1093/2010, 
Regulation  (EU)  No  1094/2010  and  Regulation  (EU)  No  1095/2010  of  the  European  Parliament  and  of  the 
Council, link here. The ESAs have also consolidated all past Q&A documents related to the SFDR, link here . 

17 

 
 
 
 
                                                           
The  use  of  estimates  can  help  market  participants  in  using  taxonomy-alignment  metrics  during  the 
initial  years  of  phased-in  application  of  the  Taxonomy  Disclosures  Delegated  Act  when  such 
information  is  not  available59.  In  addition,  the  Commission  will  assess  the  feasibility  of  issuing 
guidance to stakeholders on how to construct robust and reliable taxonomy estimates.  

Measure 5: Development of sustainability disclosure requirements for securities not captured under 
the SFDR.  

Unlike financial products (funds, insurance-based investment products, portfolio management), there 
are no cross-cutting disclosure requirements for securities claiming to be sustainable as they are not 
captured under the SFDR (bonds, covered bonds, structured notes, derivatives, equity, etc).  

This situation creates challenges for product manufacturers lacking sustainability-related information 
when assembling their investment products, and for financial advisers whose advice can cover a broad 
range  of  financial  instruments.  Indeed,  financial  advisers  are  required  to  assess  whether  the 
investment  choices  they  advise  match  the  sustainability  preferences  of  their  clients  under  the 
sustainability  amendments  under  MiFID  and  IDD,  which  proves  difficult  in  the  absence  of  such 
information  for  some  securities.  Ultimately,  this  might  expose  end-investors  to  greater  risks  of 
greenwashing.  

To remedy this situation, the Commission proposed to develop targeted additional information 
covering  non-equity  ESG  securities  under  the  proposals  for  the  Listing  Act60.  To  avoid 
unnecessary burdens, this set of disclosures for issuers will not capture securities whose sustainability 
profile can be assessed by leveraging already existing disclosures, namely CSRD disclosures (equity 
securities, non-earmarked bonds).  

These  upcoming  cross-cutting  ESG  disclosures  will  also  facilitate  the  implementation  of  the 
sustainability  preferences  under  the  MiFID/IDD  framework  by  providing  financial  advisers  and 
portfolio managers with relevant sustainability-related information to satisfy investors’ preferences.  

Going forward 

The actions presented in Sections 3 and 4 are expected to ease the implementation of key concepts of 
the  framework  and  address  several  important  challenges  reported  by  stakeholders  in  the  past  year. 
Beyond these targeted measures, enhancing the usability of the taxonomy criteria and disclosures 
and improving the consistency of the overall sustainable finance framework will remain a core 
element of the Commission’s future work.  

The  EU  will  continue  to  improve  the  framework  over  time  and  address  key  usability  concerns  in 
upcoming policy developments. Based on stakeholders’ feedback, the framework will be strengthened 
and  reviewed  to  ensure  the  rules  work  as  intended  and  enable  market  players  to  play  a  role  in  the 
transition to a more sustainable economy. This work will continue to be supported by the ESAs which 
play  a  significant  part  in  developing  and  improving  the  usability  of  the  rules  and  in  providing  the 
Commission with insights from market supervisors’ expertise. The PSF also plays an important role in 

59 Given the large exposures of EU financial products to non-NFRD companies or companies that are  not yet 
disclosing against the Taxonomy. 
60  Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  amending  Regulations  (EU) 
2017/1129,  (EU)  No  596/2014  and  (EU)  No  600/2014  to  make  public  capital  markets  in  the  Union  more 
attractive  for  companies  and  to  facilitate  access  to  capital  for  small  and  medium-sized  enterprises, 
COM/2022/762 final. 

18 

 
 
 
 
 
 
                                                           
identifying  the  key  implementation  challenges  faced  by  external  stakeholders  and  in  advising  the 
Commission on how to address them61. 

The  future  work  to  enhance  the  usability  of  the  Taxonomy  will  include  regular  updates  of  the 
Climate  and  Environmental  Delegated  Acts  to  address  usability  issues,  market  developments  and 
technological  progress.  The  Commission  will  also  continue  to  support  market  actors  with  further 
guidance  and  plans  to  adopt  an  FAQ  document  focussing  on  taxonomy  alignment  reporting 
obligations for financial undertakings by the end of 2023. In addition, as part of the upcoming review 
of  the  Disclosures  Delegated  Act,  the  Commission  will  assess  whether  and  how  to  include  entities 
outside the scope  of  taxonomy  reporting  in  the  key  performance  indicators of financial institutions, 
including SMEs.  

In the meantime, the Commission continues to work closely with the  PSF and the ESAs to monitor 
reporting under Article 8 of the Taxonomy Regulation, and to assess where changes may be warranted 
in the context of the upcoming review. The PSF has been tasked to deliver recommendations to the 
Commission (i) to ensure the taxonomy criteria and disclosures are usable on the ground for all actors 
in scope; and (ii) to enhance the usability of the taxonomy for non-EU players or economic activities 
conducted  outside  the  EU.  The  PSF  will  also  work  on  developing  market  practices  to  better 
understand how stakeholders are currently using the framework and identifying relevant opportunities 
and challenges.   

Finally, any policy developments under the wider framework will aim at enhancing the consistency 
of  different  regulatory  pieces  and  simplifying  their  implementation,  among  other  objectives.  This 
work  will  also  be  supported  by  the  expertise  of  the  PSF  which  will  advise  the  Commission  on  the 
coherence and effectiveness of the wider sustainable finance framework.   

61  PSF  mandate  can  be  found  here:  https://finance.ec.europa.eu/sustainable-finance/overview-sustainable-
finance-old/platform-sustainable-finance_en#organised 

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