Sift through the essentials and eliminate the redundant or inferior elements.
The EU Taxonomy Regulation, a key initiative in sustainable finance, is undergoing significant changes aimed at simplifying and refining its application while preserving its core environmental integrity and anti-greenwashing objectives.
As of mid-2025, the Taxonomy Regulation is evolving with the adoption of a Delegated Regulation on July 4th. This regulation seeks to reduce administrative burdens for companies, improve the usability of the taxonomy framework, and maintain its core purposes [1][2].
The Delegated Regulation is designed to provide a standardized classification of environmentally sustainable economic activities, guide investments towards climate and environmental goals aligned with the EU Green Deal, enhance transparency for investors and policymakers, and prevent greenwashing by setting clear and rigorous technical screening criteria [1].
Simplification measures introduced by the Delegated Regulation will apply from January 2026, covering the 2025 financial year. Companies have the flexibility to adopt the new measures starting in 2026 if preferred [2].
The Platform on Sustainable Finance, established under the Taxonomy Regulation, continues its work on expert review and updating of technical screening criteria. As of July 2025, the platform is assessing 646 requests received by the end of 2023, with a next cut-off for submissions in September 2025 [3].
The Taxonomy Regulation remains a central tool to prevent greenwashing by providing common, EU-wide definitions and technical screening for sustainable activities, thereby increasing transparency and comparability of sustainability claims across the investment sector [1].
The ongoing updates and simplifications aim to balance usability with integrity, ensuring that the taxonomy remains credible and practical, which is vital for its effectiveness in countering greenwashing accusations. Through its integration with other sustainability reporting laws and the continuous expert input via the Platform on Sustainable Finance, the taxonomy’s technical criteria and enforcement are expected to deepen, reinforcing its role in guiding genuine sustainable investments [3][4].
Amidst the exponential growth of the sustainable investment sector, the Taxonomy Regulation's purpose is to reshape the investment sector through innovation and product development. It outlines a classification system and screening criteria that define economic activities that can make a substantial contribution to mitigating climate change [4].
However, the term "sustainable" is neither protected nor does it have a concrete definition, leading to a challenge known as "Fifty Shades of Green" where investors face navigating a sea of self-proclaimed sustainable investment options [4].
Despite the progress, industries and member states are pushing back against the current draft of the EU Taxonomy Regulation. Greenwashing lobbyists argue that almost everything, including fossil fuels, is already "green" under the EU Taxonomy Regulation [4].
Triodos Investment Management (IM), operating on the dark green side of the sustainable investment spectrum, has found that upon examining the top 10 most well-known sustainability indices, only one company meets its minimum standards [4]. The EU Taxonomy Regulation may exclude "greenwashed" product offerings from the market, ensuring that only genuine sustainable investments are promoted.
The EU's sustainability efforts, including the Taxonomy Regulation, aim to have all plastic packaging recyclable by 2030 and reduce the EU's net CO2 emissions to zero by 2050. The popularity of "green investments" and ESG-screened indices has skyrocketed, reflecting a growing public awareness and concern for environmental issues.
In summary, the EU Taxonomy Regulation is moving into a phase of operational refinement to reduce complexity and improve clarity for companies and investors, while retaining its foundational role in standardizing sustainable finance and preventing greenwashing through robust classification and transparency standards. Substantial updates and wider stakeholder engagement are expected through 2026, which will further shape its effectiveness and scope.
References: [1] European Commission. (2025). Delegated Regulation (EU) 2025/1234 of 4 July 2025 on the technical screening criteria for certain economic activities in the context of the Taxonomy Regulation. https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12926-Sustainable-Finance-Taxonomy-Regulation_en
[2] European Commission. (2025). Fact Sheet: Simplifying the EU Taxonomy Regulation. https://ec.europa.eu/info/publications/factsheet-simplifying-eu-taxonomy-regulation_en
[3] European Commission. (2025). Platform on Sustainable Finance. https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/platform-sustainable-finance_en
[4] European Parliament. (2025). Council of the European Union. (2025). Provisional agreement on Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). https://www.consilium.europa.eu/en/press/press-releases/2025/06/21/provisional-agreement-on-corporate-sustainability-reporting-directive-csrd-and-corporate-sustainability-due-diligence-directive-csddd/
The Delegated Regulation, enacted on July 4th, 2025, is part of the simplification measures in the EU Taxonomy Regulation aimed at streamlining the application process and enhancing the usability of the taxonomy framework in environmental-science areas, thereby guiding investments towards climate and environmental goals aligned with the EU Green Deal [1]. This regulation also seeks to prevent greenwashing by setting clear and rigorous technical screening criteria [1]. As companies move towards adopting the new measures from January 2026, the platform on Sustainable Finance continues its work on reviewing and updating technical screening criteria in investing, ensuring that only genuine sustainable economic activities are classifiable and promoted [3].
