What the EU Taxonomy is
The Taxonomy Regulation establishes a science-based framework for deciding when an economic activity counts as environmentally sustainable for EU purposes. It does not replace company strategy; it sets disclosure and classification rules that channel capital toward activities that meet defined thresholds. Technical screening criteria spell out how each listed activity can make a substantial contribution to one of six environmental objectives.
The six environmental objectives
- Climate change mitigation
- Climate change adaptation
- 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
More detail on how EU instruments fit together sits in our European Union climate policies hub and the wider climate policy library.
Substantial contribution, DNSH, and minimum safeguards
An activity is not taxonomy-aligned just because it sounds green. Three conditions work together.
Substantial contribution
The activity must meet quantitative or qualitative thresholds in the delegated acts for the objective it serves. For example, electricity generation from renewables can substantially contribute to climate mitigation when it meets the relevant technical criteria.
Do no significant harm (DNSH)
The same activity must not significantly harm any of the other five objectives. Screening criteria specify DNSH checks for each activity.
Minimum safeguards
The undertaking must comply with minimum social and governance safeguards, including the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, implemented through national law and processes.
Taxonomy-eligible versus taxonomy-aligned, and the three KPIs
Taxonomy-eligible means the activity is described in the Taxonomy climate delegated act or other relevant acts, whether or not it meets all conditions. Taxonomy-aligned means the activity passes substantial contribution, DNSH, and minimum safeguards for the reported period.
Non-financial and financial undertakings in scope disclose the share of taxonomy-eligible and taxonomy-aligned economic activities using three KPIs: proportion of turnover, proportion of capital expenditure (CapEx), and proportion of operating expenditure (OpEx), each split between eligible and aligned, with accompanying narrative and methodologies.
How the Taxonomy links to CSRD, green financing, and green bonds
CSRD sustainability statements incorporate taxonomy disclosures for undertakings subject to both regimes, so investors see sustainability performance and taxonomy metrics in one reporting package. Banks use taxonomy alignment in sustainable finance products and supervisory reporting. The EU Green Bond Standard references taxonomy alignment for use-of-proceeds bonds, reinforcing demand for project-level evidence and clear CapEx mapping.
Example: venue energy renovation
Renovation of existing buildings is a taxonomy activity where substantial contribution to climate mitigation ties to energy performance improvements against defined thresholds. A venue upgrading HVAC, envelope, and controls might classify CapEx and associated turnover if the works meet the technical screening criteria and DNSH requirements. Document energy baselines, projected savings, and compliance with building codes to support disclosure and lender due diligence.
March 2026 revision consultation
In mid-March 2026 the European Commission opened a public consultation on revising the Taxonomy's technical screening criteria across large parts of the climate and environmental delegated acts, with the aim of simplifying rules and clarifying how undertakings demonstrate compliance. The process covers sectors such as energy, transport, construction, manufacturing, and forestry-related activities, alongside generic DNSH expectations. Teams should monitor the final adopted criteria and ESMA implementation guidance so turnover, CapEx, and OpEx KPIs in the sustainability statement stay aligned with the rules in force.
Official updates are published through EU finance policy channels; cross-check any figures with your legal and assurance advisers before filing.
How 50X Impact helps
50X Labs helps teams connect capital projects and operational performance to disclosure-ready evidence. 50X Impact supports consistent environmental metrics, documented methodologies, and repeatable calculations so taxonomy KPIs and CSRD content draw from the same controlled data. Your “Digital Twin” view makes it easier to show how renovation, energy, and supply chain programmes translate into reported outcomes.