On 4 July 2025, the European Commission adopted a Delegated Act amending the Taxonomy Disclosures, Climate and Environmental Delegated Acts (Delegated Regs (EU) 2021/2178, 2021/2139 and 2023/2486).
The goal is to simplify the application of the EU taxonomy, reducing administrative burden for companies while preserving the framework’s core objectives. The changes, part of the Commission’s Omnibus I simplification package, will ease EU Taxonomy reporting from 2026 onward.
Key measures include a new 10% materiality exemption threshold, streamlined reporting templates with fewer data points, and a simplified “Do No Significant Harm” (DNSH) regime.
Yet, even with these updates, the underlying complexity of EU Taxonomy compliance persists. Organizations must still face a highly complex regulatory framework, interpret over 150 activity-specific criteria across six environmental goals, maintain audit-ready data trails, and so on. This process remains complex and continues to demand substantial resource investment.
But before examining the ongoing complexities, let’s first analyze the changes introduced by the Delegated Act for both financial and non-financial undertakings.
EU Taxonomy Simplifications for Non-Financial Companies
The new Delegated Act introduces three main changes for corporates:
10% Materiality Exemption
A company can treat any economic activities contributing less than 10% of total revenue, capital expenditure (CapEx), or operating expenditure (OpEx) as non‑material. Materiality is assessed per KPI, hence an activity could be non‑material for the turnover KPI yet material for CapEx, for example. Companies that apply the exemption must disclose in their Taxonomy templates the proportion of turnover, CapEx, or OpEx omitted as “non-material”. They also have the option to skip reporting the entire OpEx KPI if OpEx is immaterial to their business, instead simply stating the total OpEx and explaining why it was excluded.
Streamlined Reporting Templates
The standard Taxonomy disclosure templates have been shortened and simplified. The Commission estimates about a 64% reduction in data fields for non‑financial companies. In particular, multiple detailed annexes have been removed. For example, the separate tables for fossil gas and nuclear activities (formerly Annex XII) have been deleted. Now, any gas and nuclear-related revenues or expenditures that are material go into the general template. In short, companies have fewer line items to compile, although they must still capture the total values of revenue, CapEx, and OpEx associated with taxonomy-eligible activities.
DNSH (“Do No Significant Harm”) Simplifications
The Delegated Act clarifies and cuts down the generic pollution DNSH criteria (Appendix C). Companies no longer need to screen self-classified substances under the EU Classification, Labelling and Packaging (CLP) Regulation. Instead, only authorized uses of restricted chemicals, like certain pesticides or refrigerants, must be screened, reducing the number of substances to be assessed.
The Effects of the Delegated Act on Banks and Financial Institutions
Financial undertakings, like banks, insurers, and asset managers see similar simplifications, plus a few sector-specific rules:
10% Asset Materiality
Financial institutions benefit from a 10% materiality threshold that mirrors the exemption available to corporates. Specifically, loans or investments financing taxonomy-relevant activities can be classified as non-material if they represent less than 10% of the relevant KPI denominator (e.g. total credit exposure, insurance portfolio, or assets under management), when the use of proceeds is known. These exposures may then be excluded from detailed eligibility and alignment assessments, although the total value excluded must still be disclosed. By contrast, exposures where the use of proceeds is unknown, such as general-purpose loans or equity holdings, cannot be excluded and must remain in the denominator. In these cases, financial institutions must rely on Taxonomy disclosures from investee companies. As with non-financial undertakings, the 10% materiality exemption is applied per KPI. That means a financial institution may consider exposures non-material for one KPI, while still fully reporting them under another. The Delegated Act also permits institutions to opt out of certain KPIs entirely if the activities they cover represent less than 10% of the firm’s net turnover.
Temporarily Narrowed KPI Scope (Deferrals)
The Delegated Act temporarily reduces the KPIs banks and financial institutions must report. Institutions have an opt-out on detailed taxonomy ratios through 2027, as they can omit to fill the detailed tables as long as they publish a statement that they do not claim any Taxonomy-aligned assets. In practice, banks may wait until 2028 to start claiming any GAR or other ratios. Separately, two KPIs are fully delayed: 1. The Trading Book KPI, which covers assets held for trading, does not need to be reported until 2028. 2. The Fees & Commissions (F&C) KPI, relating to income from lending and asset management fees, is also postponed until 2028. Other core KPIs like the standard Green Asset Ratio for lending, or Asset under Management (AuM) alignment for funds remain in play but can exclude low-materiality items.
Reporting Template Changes and Denominator Exclusions
The EU Commission estimates an approximate 89% cut in the required data points for credit institutions in their taxonomy reporting templates, with a greater reduction than for corporates. With the Delegated Act, financial institutions will use a single summary KPI template, replacing several former sub-templates for specific exposures like gas, nuclear, or adaptation. Major performance tables have been merged and simplified. Moreover, financial institutions may omit exposures to counterparties that are outside the scope of corporate ESG reporting. The denominator for KPIs, such as the Green Asset Ratio, must exclude goodwill, certain commodities, derivatives, cash, cash equivalents, and similar items, as these exposures do not have a direct environmental footprint. This also means that loans to non-EU companies or small firms, which themselves are not obliged to report Taxonomy data, do not need to be counted in the denominator of ratios. This adjustment helps align the numerator and denominator of the Green Asset Ratio by excluding irrelevant exposures. Banks may still choose to include them voluntarily if they like, but they are no longer forced to.
Simplified, Not Simple: The Ongoing Compliance Challenges
Even with streamlined templates and materiality exemptions, EU Taxonomy reporting remains a resource‑intensive challenge for corporates and financial institutions. Organizations must translate a dense regulatory rulebook into actionable data, mapping every revenue stream, investment or loan to precise NACE codes, verifying eligibility, substantial contribution, and DNSH thresholds for diverse activities, and reconciling figures across multiple systems.
Each data point must be fully auditable. Compliance teams need precise documentation detailing when and how data was collected, which legal texts and technical criteria were applied, and how exceptions were handled. Any gap in this audit trail can expose firms to regulatory scrutiny or greenwashing allegations.
On top of these fundamentals, the EU Taxonomy framework is still evolving, along with other sustainable finance reporting rules and regulations, requiring continuous adjustments from both financial and non-financial undertakings. Each regulatory change must be analyzed for impact, communicated to stakeholders, and embedded into reporting workflows, diverting resources from core risk and sustainability tasks.
This combination of technical complexity, operational overhead, and regulatory flux means that, despite efforts to streamline processes and simplify compliance, manual approaches are no longer sustainable.
Looking Ahead: Preparing for 2026 and Beyond
Following its adoption by the European Commission, the Delegated Act is subject to a formal scrutiny period by the European Parliament and the Council. This review spans four months, with the option for either institution to request a two-month extension, making the scrutiny period up to six months in total. During this time, lawmakers may analyze the Act and raise any objections.
If no objections are raised, the Delegated Act proceeds to publication in the Official Journal of the European Union, which marks its entry into force. The new regulatory requirements are scheduled to apply starting from 1 January 2026, covering reports on the 2025 financial year.
For banks and corporates alike, the time to prepare is now. Assess internal processes, update data-gathering workflows, and explore technological partners, such as Dydon AI, that can streamline and future-proof EU Taxonomy compliance. Investing into this today will not only ensure timely compliance in 2026 but also position corporates and banks to adapt rapidly as the EU sustainable finance framework continues to evolve.
For more information about the European Commission’s Delegate Act:
Press release of the EU: https://finance.ec.europa.eu/publications/commission-cut-eu-taxonomy-red-tape-companies_en
FAQs: https://ec.europa.eu/commission/presscorner/detail/en/qanda_25_1726
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