EU Taxonomy Reporting 2025

Your expert for questions

Christoph Schellhas
Partner, Financial Services Sustainability Leader at PwC Germany
Email

Use of Taxonomy quota for strategic purposes is currently the exception rather than the rule

The EU Green Deal is a commitment to make Europe climate-neutral by 2050. The EU Taxonomy Regulation is part of the Green Deal and is designed to increase transparency around sustainable economic activities with the aim of creating incentives for sustainable investment and lending. We at PwC have been monitoring and analysing progress in Taxonomy reporting since 2022, with our latest study concentrating on the financial sector. We analysed the FY 2024 reports by 93 credit institutions, insurance companies and asset managers – most of them listed companies – from ten EU countries and Switzerland. 

Financial institutions report the Taxonomy eligibility and alignment of their investment activities in terms of turnover and Capital Expenditure (CapEx). This year, financial institutions used the data from their financial counterparties for the first time as financial institutions were required to report on Taxonomy alignment for the climate objectives for the first time for FY 2023. But despite improved data availability, one of our key findings was that average Taxonomy eligibility and alignment in the financial sector in FY 2024 remains largely unchanged. In addition, only few financial institutions currently use Taxonomy data for strategic purposes such as portfolio management and investment decision-making. Instead, ongoing regulatory changes are tying up resources and there is also room for improvement in some indicators. In the future, Taxonomy data is likely to become more important for green financial products such as green bonds.

Our study at a glance

Current state of Taxonomy reporting 

Financial institutions have only been required to report Taxonomy alignment since FY 2023, as their reports depend on data being provided by their portfolio companies. Taxonomy alignment reporting is required for environmental objectives 1 (climate change mitigation) and 2 (climate change adaptation), along with Taxonomy eligibility for objectives 1 to 6. The four remaining environmental objectives refer to sustainable use and protection of water and marine resources (objective 3); transition to a circular economy (objective 4); pollution prevention and control (objective 5); and protection and restoration of biodiversity and ecosystems (objective 6). 

Wide variation in length of reports 

Companies are required to report EU Taxonomy information in the sustainability section of their annual reports. The length of this reporting varied between 5 and 183 pages among the 93 reports examined in this study. Variations in typesetting and layout make direct comparisons difficult, but it is nonetheless clear that average length of Taxonomy information varies significantly between industries: reports from credit institutions averaged 67 pages, asset managers 57 pages, and insurance companies just 30 pages. 

Taxonomy data is heavily dependent on the business model

Taxonomy quota as a whole varies depending on the business model and portfolio. Low ratios often result from a large proportion of business relationships with non-EU companies, which are not subject to NFRD/CSRD reporting. High ratios, meanwhile, are often attributed to conducting business mostly with companies that are subject to the reporting requirements, and to better data availability and quality for real estate and mortgage portfolios. For FY 2024, the bulk of Taxonomy-aligned activities were related to environmental objective 1 (climate change mitigation). 

Differing methodologies limit comparability

At the same time, it is clear that different financial institutions use different methods to calculate Taxonomy eligibility and alignment, which makes comparisons difficult. There is a lack of agreement on how to calculate coverage ratios, and on the issue of whether to use market value or book value. Institutions also take different approaches when data is unavailable, particularly in the case of exposure to nuclear and gas.

Credit institutions are increasing their Green Asset Ratios

The average proportion of Taxonomy-eligible turnover among credit institutions fell from 32.8% in FY 2023 to 28.4% in FY 2024; CapEx eligibility fell too, from 33.0% to 29.6%. The range of eligibility across credit institutions was 16.0% to 58.8% of turnover and 16.2% to 63.6% of CapEx, which was greater than in FY 2023 (20%–44% of turnover, 21%–45% of CapEx).

By contrast,credit institutions increased their Green Asset Ratios (GARs), which indicate the level of Taxonomy alignment: average turnover alignment rose from 2.2% to 2.9%, and average CapEx alignment rose from 2.3% to 3.2%.

Increased availability of better-quality energy data has made assessment of real estate assets much easier. More than two thirds (70%) use energy performance certificates (EPCs) or similar.

Low quotas reported by asset managers 

Among the financial institutions examined in this study were nine asset managers from five EU countries. Their average Taxonomy eligibility was significantly lower than was the case for credit institutions and insurers, although their alignment stats were similar. Average Taxonomy eligibility among these asset managers was 9.9% of turnover and 9.6% of CapEx, while average alignment was 2.0% of turnover and 2.3% of CapEx. National averages varied between 1.4% and 3.5% of turnover, and between 2.0% and 2.6% of CapEx.

German insurers are well above average on Taxonomy alignment 

In the insurance sector, the investment business and the underwriting business are considered separately. In investments, average Taxonomy alignment across all countries was 18.2% of turnover and 16.5% of CapEx. National averages ranged between 7.1% and 26.1% of turnover, and between 8.6% and 21.2% of CapEx; in FY 2023, these ranges were 3.5% to 27.5% of turnover and 4.2% to 32.4% of CapEx.

The average national proportion of Taxonomy-aligned turnover in FY 2024 was 2.5%, while CapEx alignment was 2.7%. The range was between 1.3% and 5.5% of turnover, and between 2.1% and 4.5% of CapEx. In FY 2023, the range was greater (0.7%–6% of turnover, 0.9%–4.3% of CapEx) and the overall averages were lower (2.1% of turnover, 2.2% of CapEx). As with credit institutions, insurance companies have benefitted from better real estate energy consumption data, better availability of data from other financial companies, and their large proportion of industrial business partners.

In the underwriting business, average Taxonomy eligibility in FY 2024 was 13.5% (range: 0.3%–33.4%). This is a significant fall since FY 2023, when the average was 18.8%. Germany has the highest national average eligibility, at 33.4% (FY 2023: 39.6%).

Average Taxonomy alignment rose from 1.9% to 2.1%. The national average for Germany was significantly higher, at 4.6% (FY 2023: 3.6%).

One of the causes of the fall in Taxonomy eligibility are the EU Commissions FAQs of December 2023. These state that only the climate relevant premium shares should be used when calculating Taxonomy alignment. The FAQs were unclear on this issue when it comes to Taxonomy eligibility, but more than half (56%) of insurers applied this premium split for Taxonomy eligibility as well as alignment.

Most insurers included products from the “other motor vehicle insurance”, “maritime, aviation and transport insurance”, and “fire and other property insurance” categories.

Methodology

For this study, PwC analysed public FY 2024 reports by a total of 93 credit institutions, insurance companies and asset managers which fall under the Taxonomy Regulation – most of them listed – from ten EU countries and Switzerland. 25 were based in Germany, 16 in Italy and 11 in Poland, with the remainder representing Belgium, Finland, France, Luxembourg, the Netherlands, Spain, Sweden and Switzerland.