Clarifying and consolidating EU Taxonomy FAQs

Accountancy Europe is sharing the accountancy profession’s latest observations on the Frequently Asked Questions (FAQs) accompanying the EU Taxonomy Regulation and its delegated acts. Our observations are grounded in the profession’s practical experience with the EU Taxonomy requirements application over the past four years.

We support the European Commission’s (EC) ongoing efforts to strengthen the framework for sustainable finance across Europe. The Taxonomy Regulation and its delegated acts are still relatively new, highly comprehensive, and complex. The FAQs aim to support financial and non-financial undertakings in implementing the rules and are generally helpful. However, some FAQs seem to go beyond or even contradict the legal requirements (see examples in our letter).

Addressing legal uncertainty and practical implications

Because FAQs are not legally binding, they can create legal uncertainty for stakeholders.  Undertakings and auditors must consider the resulting uncertainty in their reporting and assurance processes which may increase administrative efforts.

For instance, if reporting undertakings apply a consistent and coherent interpretation of the binding legal requirements – even if this interpretation differs from the understanding presented in the EC’s FAQs – there are no compelling grounds for auditors to issue a qualified assurance opinion. While the FAQs indicate the intended interpretation of the law, they cannot form, the basis for a modified assurance opinion because of their lack of legal authority.

Identifying issues and inconsistencies

Together with our experts dealing with EU Taxonomy matters, we have identified FAQs  that could be perceived as:

1.  extending legal requirements;
2. contradicting legal requirements;
3. contradicting other FAQs, or
4. being difficult to understand, together with corresponding explanations.

The interpretation of the FAQs may vary depending on the jurisdiction or experts; therefore, some categorisations could be assessed differently.

Our recommendations to the European Commission

To ensure effective and consistent application of the rules and contribute to legal certainty, we call on the EC to take swift action to:

• review and streamline existing FAQs sets to eliminate any inconsistencies;
• consolidate all FAQs into a single, easily-to-access  document;
• consider adjusting the EU Taxonomy Regulation and /or its delegated acts to address those matters outlined within the FAQs that are critical or based on shortcomings identified in the legal texts;
• publish a consolidated version of all delegated acts in a single document;
• consider aligning the timing of FAQ releases with reporting cycles to avoid conflicts for undertakings.

For more information, please reach out to Vita Ramanauskaité, Senior Manager, Head of Sustainability at Accountancy Europe.