EU Taxonomy Regulation Article 8 Disclosure Requirements: Step-by-Step Implementation for Financial Services

What does EU Taxonomy Article 8 require from financial services firms?

EU Taxonomy Regulation Article 8 mandates that financial market participants and large undertakings disclose the proportion of their investments or activities that are taxonomy-eligible and taxonomy-aligned. Financial services firms must publish detailed metrics showing how their portfolios contribute to the EU's six environmental objectives, with specific calculation methodologies and disclosure templates.

The regulation applies to financial market participants as defined in SFDR Article 3, including asset managers, pension funds, and insurance companies. Large financial undertakings meeting two of three criteria (€20M balance sheet, €40M net turnover, or 250+ employees) must also comply. The disclosure requirements became mandatory in January 2022 for the first two environmental objectives (climate change mitigation and adaptation), with the remaining four objectives (water, circular economy, pollution prevention, biodiversity) added in 2023.

How do you calculate taxonomy eligibility vs alignment percentages?

Taxonomy eligibility and alignment represent different compliance levels requiring distinct calculation approaches. Eligibility measures whether economic activities can potentially contribute to environmental objectives, while alignment confirms they actually do so while meeting technical screening criteria and social safeguards.

Eligibility Calculation Process:

1. Identify portfolio investments engaged in taxonomy-eligible economic activities
2. Map activities to the 600+ detailed descriptions in the Climate Delegated Act
3. Calculate the percentage of assets invested in eligible activities
4. Apply the appropriate denominator (total assets under management for Article 8 SFDR funds, balance sheet total for Article 9 SFDR funds)

Alignment Calculation Requirements:

• Verify substantial contribution to at least one environmental objective through technical screening criteria
• Confirm "do no significant harm" (DNSH) compliance across all other environmental objectives
• Validate adherence to minimum social safeguards including OECD Guidelines and UN Global Compact principles
• Document evidence supporting each alignment determination

Key Calculation Challenges: Many financial services firms struggle with limited data availability from investee companies, complex activity mapping for diversified business models, and evolving technical screening criteria. The European Securities and Markets Authority (ESMA) estimates that data availability issues affect 60-80% of taxonomy calculations in current market conditions.