Takeaways

• European financial regulators have proposed EU Taxonomy Simplification Measures to reduce sustainability reporting requirements across industries.
• The proposals focus on making key performance indicators (KPIs) more practical while maintaining transparency for investors.
• Public consultations on the proposed changes will remain open until August 12, 2026.

The European Union's three financial supervisory authorities have unveiled a new set of EU Taxonomy Simplification Measures designed to make sustainability reporting less complex for businesses, banks, insurers, and asset managers.

The proposals come from the European Supervisory Authorities (ESAs), comprising the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA), and the European Insurance and Occupational Pensions Authority (EIOPA). Together, the regulators aim to reduce administrative work while ensuring that the EU Taxonomy continues to support sustainable investment decisions.

The EU Taxonomy Regulation is a key part of the bloc's Sustainable Finance framework. It provides a common classification system that identifies economic activities contributing to the EU's environmental objectives. To qualify, an activity must significantly support at least one of six environmental goals without causing major harm to the others.

Read More: SFDR: Sustainable Finance Disclosure Regulation (EU) Explained

The latest proposals build on the European Commission's wider effort to simplify sustainability rules. The Commission introduced its Omnibus I package to reduce reporting obligations across several ESG-related regulations, with the EU Taxonomy among the first areas selected for review.

Last year, the Commission already reduced the number of required reporting data points and allowed companies to exclude non-material activities from taxonomy alignment assessments. Earlier this year, it asked the ESAs to recommend additional technical improvements, particularly around key performance indicators (KPIs).

Each regulator has now suggested changes tailored to its own sector while also putting forward joint recommendations on broader reporting issues.

For listed companies, ESMA proposes narrowing the scope of the operational expenditure (OpEx) KPI, one of the more complex reporting requirements. Instead of covering a broad range of spending, the regulator recommends limiting mandatory reporting to research and development expenses. Companies could also choose to report additional sustainability-related spending, such as green procurement, through a voluntary "OpEx+" category.

The EBA, which oversees the banking sector, has proposed reducing or removing several banking-specific KPIs. These include indicators that measure income from advisory services linked to taxonomy-aligned activities and metrics related to trading activities involving sustainable assets. According to the authority, these disclosures create a significant reporting burden while offering limited practical value.

Meanwhile, EIOPA has recommended updating insurance-related indicators to better reflect how insurers support taxonomy-aligned businesses and investments. It also suggests introducing a new long-term metric to track green insured activities while removing disclosure requirements that it considers unnecessary.

Beyond sector-specific changes, the ESAs have jointly proposed simplifying ESG Reporting for corporate groups operating across multiple industries. They also advised against expanding reporting requirements with additional operational expenditure metrics, arguing that doing so would increase complexity without delivering meaningful benefits for investors.

Also Read: What's New in ESG Regulations for 2026: Your Compliance Decision Guide

The regulators have opened public consultations on the proposals, inviting feedback from stakeholders until August 12, 2026. Once finalized, the EU Taxonomy Simplification Measures could further streamline Sustainability Reporting while preserving the transparency needed to support informed investment decisions across the European Union.

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Source: ESGtoday