2025 revision of the EU Taxonomy: how does the flow of green funds affect companies?
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What is it and why is it important?
The taxonomy establishes six environmental objectives: climate change mitigation, adaptation, sustainable use of water, circular economy and pollution prevention, protection of biodiversity and ecosystems.
For an activity to be considered “green” it must:
o Contribute significantly to one of these objectives.
o Do No Significant Harm (DNSH) to other targets.
o Comply with basic human and labour rights standards.The taxonomy serves to direct investments towards truly sustainable activities and avoid greenwashing.
What's New in the 2025 Revision
· In March 2025, the Sustainable Finance Platform published a document with the proposed changes for the new taxonomy delegated act, with a direct impact on reporting under the CSRD and the way alignment is assessed.
One of the recommendations is to simplify the DNSH (“Do Not Cause Significant Harm”) approach, clarifying calculations, KPIs applicable to turnover or capital expenditures, and reporting for different types of businesses (financial vs. non-financial).
It is stressed that simplification cannot be interpreted as a lowering of requirements: the taxonomy must continue to ensure that green investments are real and materially sustainable.
In addition, the guidelines consider facilitating SMEs’ access to the system, with adapted methodologies and fewer administrative burdens.
How sustainable financing conditions companies
Banks, funds and financial institutions will evaluate projects and companies according to their degree of alignment with the taxonomy. Non-compliant activities could have a higher cost of capital or reduced access to ESG financing.
Direct relationship with ESG/CSRD reporting
Companies subject to the Corporate Sustainability Reporting Directive (CSRD) will have to demonstrate the extent to which their activities are aligned with the taxonomy. The new features of 2025 may modify calculation criteria and thresholds.Greater demand for evidence and transparency
Generic statements will not suffice; It will be necessary to demonstrate with metrics, evidence and documentation the specific level of alignment according to the criteria of the taxonomy.Redefinition of sectoral priorities
The sectors with the greatest weight (energy, construction, transport, manufacturing) will have to adapt more urgently, as they account for a large part of European emissions.Reputational risk and conditional investment capital
Companies with little alignment will be at a disadvantage against better-positioned competitors, which could affect their ESG rating and access to responsible investing.
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