The Platform on Sustainable Finance (PSF), an expert group mandated by the European Commission to advise it on the development of sustainable finance policies, announced the launch of a new consultation on a series of updates to the EU Taxonomy, aimed at simplifying and expanding the classification system for defining sustainable economic activities.

The EU Taxonomy is part of the EU Action Plan on Sustainable Finance, establishing a classification system enabling the categorization of economic activities that play key roles in contributing to at least one of six defined environmental objectives, and that Do No Significant Harm (DNSH) to the other objectives. The six objectives include climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.

The Taxonomy entered into effect in 2022 with disclosure requirements on the first two objectives, climate change mitigation and adaptation, based on the EU Taxonomy Climate Delegated Act, and with the other four objectives applying as of the beginning of 2024, based on the Environmental Delegated Act.

The Platform on Sustainable Finance’s mandate by the EU Commission includes making recommendations to enhance the usability of the Taxonomy, and to expand the scope of activities covered by the Taxonomy.

According to the PSF, the proposals included in its new draft report follow extensive engagement with stakeholders, and companies in particular, which indicated a need to simplify the application of DNSH criteria, and a push by companies to have their activities included in the Taxonomy.

In light if the engagement feedback, the new proposals “employed a specific focus on the usability of the DNSH criteria” for new activities, with each recommendation including a dedicated section on how usability has been considered, and the PSF also said that it scrutinized Climate Delegated Act DNSH criteria for usability as well. Additionally, the report proposes new Taxonomy activities, including digital solutions and services, and mining and smelting of lithium, nickel and copper.

In an introductory note include in the report, Helena Viñes Fiestas, Chair of the Platform on Sustainable Finance, said:

“During this period, our priority has been to improve the usability and effectiveness of the Taxonomy and the broader sustainable finance framework. Once the necessary changes have been implemented, the Platform hopes that a future mandate will allow us to focus on incorporating many more activities into the Taxonomy.”

Click here to access the draft report and consultation.