EU Taxonomy: 34% Growth in Aligned CapEx, but Challenges Persist

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The EU has long embarked on a path of ecological transition to decarbonize the economy and promote environmental sustainability. Among the key tools for directing financial flows towards sustainable investments, the EU Taxonomy has proven to be a key element. In 2023, capital expenditures (CapEx) aligned with the EU Taxonomy reached 250 billion euros, marking an increase of 34% compared to the previous year. This figure emerges from the report Financing a Clean and Competitive Transition, Monitoring Capital Flows to Sustainable Investments, published in March by the European Union's Platform on Sustainable Finance. The analysis conducted on 2,180 large European publicly traded companies subject to the Non-Financial Reporting Directive (NFRD) highlights an increase in sustainable investments, with growing attention towards enabling and transitional activities.

In detail, half of the CapEx aligned with the Taxonomy was allocated to activities that facilitate the ecological transition, registering an annual growth of 40%. The transition activities, while not fully environmentally sustainable, are considered necessary to reduce carbon emissions: in 2023 they represented 11% of the total aligned CapEx, more than doubled compared to the previous year. The remaining investment, amounting to about 100 billion euros, focused on low-carbon projects. Additionally, the report highlights another 206 billion euros allocated to transition-related capital, with a significant portion of investments eligible according to the Taxonomy. This underscores the importance of monitoring broader financial flows to ensure a credible transition.

Despite the positive trend, current investments are still inadequate to meet the EU's climate targets. According to the European Commission, to meet the Green Deal deadlines, at least 7-8% of the Union's annual GDP should be allocated to green investments. In terms of sustainable finance, green bonds remain the main financing instrument. Since 2021, annual green bond issuance in the EU has exceeded 200 billion euros. In 2023, green loans reached a share of 908 billion euros, while green bonds in circulation amounted to 781 billion euros, bringing the total green debt to 1.69 trillion euros.

The analysis of CapEx aligned with the Taxonomy shows that some key sectors are driving the green transition. In 2023, 44% of sustainable investments (109 billion euros) were allocated to utilities, with 67 large electric companies declaring that three-quarters of their investments meet the Taxonomy criteria. The manufacturing sector accounted for 25% (62 billion euros), but the average level of alignment with the Taxonomy remained low (9%), involving over 530 companies. Among them, car manufacturers invested about 40 billion euros in sustainable activities, mainly in the production of electric vehicles. The real estate sector showed significant investments, but the greatest deficits are found in industrial decarbonization and building renovation. Sustainable investments are concentrated in Western and Northern Europe, while Central and Eastern Europe face major obstacles.

On April 1st, the EU Parliament and Council will discuss the Omnibus package, presented on February 26th by the European Commission, which aims to simplify the sustainability regulations. The new measures propose a reduction in reporting obligations for companies, limiting them to larger ones (corresponding to the scope of the CSDDD). However, companies that fall within the future scope of the CSRD (with more than 1,000 employees and a net revenue of up to 450 million euros) will still be able to voluntarily report their alignment with the Taxonomy. Among the main novelties of the Omnibus package are the introduction of a financial materiality threshold for reporting and the reduction of the number of reporting models by about 70%. The potential implementation of the Omnibus Package amendments could reduce transparency and the availability of information on activities in line with the ecological transition.

This article was created as part of the "Biodiversity services EU expansion" project (CUP: E43D22000480009) under the Regione Lombardia "PR FESR 2021-2027 – LINEA INTERNAZIONALIZZAZIONE 21-27" call, aimed at supporting the internationalization of Italian companies. 3Bee is the naturetech company that develops innovative technologies for monitoring, protection, and regeneration of biodiversity, supporting companies in defining customized climate strategies based on the analysis of their impacts and dependencies on nature. With a solid portfolio in Italy, Germany, and France and significant partnerships, 3Bee continues its expansion into international markets to create concrete impact through technology