The DNSH criteria of the EU Taxonomy and the PAI indicators of the SFDR
Analysis of compatibility and exemplary proposals for amendments for climate change mitigation and Sustainable Use and Protection of Water
The EU taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) are central instruments in the EU Sustainable Finance Framework. Both aim at redirecting financial flows towards sustainable investments while both face critique in terms of coherence and usability.This report presents suggestions to leverage synergies between the SFDR and the Taxonomy by enhancing the usability of the Do No Significant Harm (DNSH) criteria in the EU Taxonomy and the Principle Adverse Impact (PAI) indicators under the SFDR. The report analyses the environmental objectives of climate change mitigation and sustainable use and protection of water for the economic sectors energy, manufacturing, construction and real estate, transport, and water supply. The report was completed in March 2025 and does not address current political and regulatory developments regarding the sustainable finance regulation.