The EU has released details of the first two EU Taxonomy categories, climate mitigation and climate adaptation. The other four follow by the end of 2021.
Financial market participants (banks, asset managers, etc.) will have to report to what extent their portfolio is in line with the taxonomy. That information has to come from their investees, which in principle seem to comprise large listed companies (currently 500 employees or more) in priority sectors – so that's a limited part of the full economy.
But is that true? I argue that the taxonomy applies to many more companies:
- The taxonomy focuses on economic activities, products and services. For these activities Revenues, CapEx and OpEx need to be disclosed. The focus on activities means that any sale, production or investment falls under the requirements. That is quite understandable: an investment in clean energy by any company would and should count as relating to climate mitigation. Obviously companies in the (8) priority sectors would need to report their revenues and OpEx too. This means that every company mandated to disclose under the NFRD (see below …) should track its investments ánd – depending on its business – its revenues and OpEx from eligible activities.
- More categories are to follow shortly: pollution prevention & control, transition to a circular economy, sustainable use and protection of water and marine resources and protection and restoration of biodiversity and ecosystems, covering a much wider array of sectors than currently seems the case.
- Due to expected regulatory changes (see the next development) and the interest of the financial industry to disclose high portions of EU Taxonomy-aligned investments in their portfolio, many more companies than just the ones eligible under the NFRD can expected to be requested to report their Revenues, CapEx and OpEx on basis of the EU Taxonomy to secure access to appropriate financing.