EU Commission Approves Simplified Delegated Act for Taxonomy Regulation: A Step Towards Greener Investments
Tokyo, Japan – July 15, 2025 – The Japan External Trade Organization (JETRO) announced today that the European Commission has adopted a simplified delegated act concerning the EU Taxonomy Regulation. This development marks a significant step forward in the EU’s ambitious agenda to steer financial flows towards sustainable economic activities. The adopted proposal aims to streamline the process and provide greater clarity for businesses and investors navigating the complex world of sustainable finance.
What is the EU Taxonomy Regulation?
At its core, the EU Taxonomy is a classification system that defines what constitutes an environmentally sustainable economic activity. Its primary goal is to provide a common language and set of criteria for investors and companies, enabling them to identify and invest in activities that genuinely contribute to environmental objectives. The Taxonomy aims to prevent “greenwashing” – misleading claims about the environmental credentials of products or services – and to mobilize private capital for the transition to a climate-neutral economy by 2050.
The Taxonomy currently covers 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
The Need for Simplification
While the EU Taxonomy is a foundational piece of legislation for sustainable finance, its initial implementation has faced challenges, including complexity and a need for further refinement to ensure its practical application. The delegated acts, which flesh out the technical screening criteria for each environmental objective, have been extensive and detailed. This has led to calls for simplification to make the Taxonomy more accessible and user-friendly for a wider range of stakeholders.
Key Features of the Simplified Delegated Act
While specific details of the newly adopted simplified delegated act are still being disseminated, the general intention is to:
- Reduce complexity and improve clarity: The act is expected to simplify the criteria for determining whether an economic activity is environmentally sustainable. This could involve clearer definitions, fewer exemptions, or more streamlined reporting requirements.
- Provide a more practical framework for businesses: By making the Taxonomy more accessible, the EU aims to encourage more companies to align their activities and investments with sustainable criteria. This, in turn, can facilitate the flow of capital towards green projects.
- Enhance investor confidence: A clearer and more predictable Taxonomy builds trust among investors, assuring them that their investments are genuinely contributing to environmental goals and reducing the risk of greenwashing.
- Potentially accelerate the green transition: By removing barriers to entry and making sustainable investment more straightforward, the simplified Taxonomy could accelerate the shift towards a low-carbon and environmentally sound economy.
Implications for Japanese Businesses
For Japanese companies operating in or planning to operate in the European Union, this development is highly relevant. The EU Taxonomy has significant implications for:
- Market access: Companies seeking to attract investment from the EU or to market their products and services as “sustainable” within the EU will need to understand and comply with the Taxonomy’s criteria.
- Investment decisions: Japanese companies looking to invest in Europe or to raise capital from European sources will need to demonstrate how their activities align with the EU Taxonomy.
- Reporting requirements: Increasingly, financial institutions and large companies are being required to report on their Taxonomy alignment. This simplified act may streamline those reporting obligations.
- Supply chain management: As more European companies adhere to the Taxonomy, Japanese suppliers to these companies may also be expected to provide information about their own sustainability performance and alignment.
What’s Next?
The adoption of this simplified delegated act is a positive step. However, it’s important to note that the EU Taxonomy is a dynamic framework that is continuously evolving. Japanese businesses should stay informed about:
- Further refinements: The European Commission may continue to refine the Taxonomy and its delegated acts over time.
- Sector-specific guidance: Detailed guidance for specific sectors is often provided, which can be crucial for accurate implementation.
- Implementation by financial institutions: How financial institutions integrate the Taxonomy into their lending and investment processes will be key to its effectiveness.
JETRO will continue to monitor these developments and provide updates to support Japanese businesses in navigating the evolving landscape of sustainable finance in the EU. This simplified approach by the European Commission signals a commitment to making sustainability a more integrated and achievable goal for businesses across the globe.
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At 2025-07-15 02:05, ‘欧州委、タクソノミー規則の委任規則に関する簡素化法案を採択’ was published according to 日本貿易振興機構. Please write a detailed article with related information in an easy-to-understand manner. Please answer in English.