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How the EU’s Sustainable Taxonomy Reboot Could Drive Climate-Proofing Efforts

Recommended updates to green classification system could ease identification of adaptation activities and prompt greater investment

Author

Louie Woodall
February 20, 2025

Source: Billion Images

TL;DR

  • The European Commission is streamlining its tangle of sustainability rules through three ‘Omnibus’ packages, targeting key regulations like the CSRD, CSDDD, and EU Sustainable Taxonomy

  • Simplifying the Taxonomy — the classification system that underpins the bloc’s sustainable reporting and green finance framework — could encourage more investment in adaptation measures

  • Companies and investors cite the Taxonomy as overly complex and difficult to implement, with just 5% of firms reporting adaptation-aligned activities in 2023

  • Recommended changes by expert group the Platform on Sustainable Finance include clearer adaptation criteria, expanded sector coverage, and easier classification of “adapted” and “enabling” activities to improve usability

  • The Omnibus proposals, expected February 26, could face contentious negotiations as EU member states, businesses, and international bodies weigh in on the reforms

The Trump administration is taking the hatchet to climate regulations in the US. Everything from public company disclosure of climate risks to an order on flood management are being slashed away in the name of “efficiency” or “anti-wokeness”.

On the other side of the Atlantic, the European Union is engaged in a lower-key effort to streamline its own mass of climate rules. And while EU lawmakers have abstained from the kind of burn-it-all-down rhetoric favored by their American peers, the mooted changes could be just as far-reaching.

“We have a very clear signal from the European business sector that there is too much complexity,” said European Commission President Ursula von der Leyen last month. “We have to cut red tape. We will deliver an unprecedented simplification effort.”

This has potentially vast implications for the continent’s climate adaptation efforts. Indeed, adaptation is explicitly called out in the Commission’s plan to make the EU more competitive. “Integrating climate resilience in urban planning, deploying nature-based solutions, developing nature credits and adaptation in agriculture while preserving food security” are among the proposals listed to “protect the EU economy and society from the worst of natural calamities.”

Ursula von der Leyen. Source: European Parliament

Von der Leyen’s regulatory overhaul will be carried out via three ‘Omnibus’ legislative packages, set out in a European Commission work plan issued last week. The first seeks to “simplify” three flagship sustainable finance regulations — the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Sustainable Taxonomy. The second aims to simplify investment rules, and the third to exempt smaller companies from certain sustainability-related requirements.

The Commission hopes these measures will make its existing tangle of sustainability regulations easier to implement, more effective, and supportive of economic growth. Experts believe they could also bolster the EU’s climate resilience.

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