What is the EU Taxonomy?
The EU Taxonomy is the EU's dictionary of sustainable economic activities. The Taxonomy describes which investments are considered 'green'. This promotes transparency, counters greenwashing and drives the shift of capital towards the sustainable economy of the future; a development that Triodos supports wholeheartedly. However, Triodos Bank isopposed to plans to classify the use of natural gas and nuclear power as 'green transition techniques'. This would put the added value of the Taxonomy at risk, evolving it from a science-based dictionary to a controversial tool that actually encourages greenwashing.
An economic activity is seen as Taxonomy-eligible if it is described in the Taxonomy Delegated Acts, irrespective of whether that activity meets any or all of the technical screening criteria laid down in the Delegated Acts. The EU Taxonomy regulation currently only includes the specific technical screening criteria for two environmental objectives: climate change mitigation (CCM) and -adaptation (CCA). This means that in 2021 we only assess Taxonomy-eligibility for activities that could contribute to climate change mitigation and climate change adaptation. In the coming years, the screening criteria will be extended to the remaining environmental objectives (see the figure below). Additionally, the Taxonomy might be expanded to also define criteria for economic activities that contribute to social objectives. 1
One step further is when an activity is Taxonomy-aligned, meaning the activity substantially contributes to one or more of the environmental objectives, the economic activity does no significant harm (DNSH) to any of the other environmental objectives and additionally the activity complies with minimum social safeguards and with the technical screening criteria defined by the EU.
What does Triodos Bank need to disclose?
All companies that are obliged to report on their non-financial information under the NFRD (Non-Financial Reporting Directive) are required to disclose information on the EU Taxonomy in their annual report. The EU Taxonomy regulation lays requirements for reporting which economic activities fall under the Taxonomy. As a credit institution, Triodos needs to report Taxonomy-alignment in the form of the green asset ratio (GAR). The GAR shows the proportion of a credit institution’s assets financing and invested in Taxonomy-aligned economic activities (the numerator) as a proportion of total covered assets (the denominator). Taxonomy-related KPIs for off-balance exposures such as financial guarantees and assets under management are reported separately based on the templates provided in the Delegated Act. The assets under management are not part of the mandatory disclosure as third-party information providers currently only provide estimates for Taxonomy-eligibility, with direct Taxonomy-eligibility information expected to be in available in 20222.
In the first year of implementation the reporting requirements focus on Taxonomy-eligibility. In the future, banks need to report on Taxonomy-alignment, meaning that all criteria as set out in the figure above are met. The calculation of a GAR on Taxonomy-alignment for credit institutions will only be required from 2024 with respect to financial year 2023 as outlined by the European Commission. For the reporting years 2021 and 2022 we will only report on those economic activities that are Taxonomy-eligible.
Guidance provided by the EU in December 2021 and updated in February 2022 in the form of an FAQ has introduced a distinction between mandatory and voluntary reporting on the EU Taxonomy. For the mandatory reporting, eligibility-related disclosures of financial undertakings are to be based on actual information provided by counterparties. As the EU Taxonomy only entered into force on 1 January 2022, we expect that very few clients have, as yet, disclosed their Taxonomy-eligibility over 2021. Therefore, there are very limited possibilities for Triodos Bank to report on the mandatory EU Taxonomy disclosures. Triodos intends to provide transparency to its stakeholders by reporting this information on a voluntary basis by estimating the client economic activity with their industry classification4.
Scoping considerations: most of our sustainable lending portfolio falls outside the EU Taxonomy scope
We acknowledge the positive development of the EU Taxonomy but also strongly recognise that in the first year of the phased-in approach, a significant portion of our portfolio cannot be labelled as green according to the rules of the game within the EU Taxonomy even though we believe our entire portfolio reflects our mission and frontrunner position as a values-based bank. While Triodos Bank needs to report on the EU Taxonomy, not all exposures fall under the current scope of the Taxonomy and therefore cannot be assessed for Taxonomy-eligibility. The EU Taxonomy is limited in its scope in several aspects:
Sustainable objectives in 2021 don't cover all environmental or social aspects
Currently, only the first two sustainable objectives, climate change mitigation and climate change adaptation, are included in the EU Taxonomy legislation. For these two objectives, the EU Taxonomy has identified a limited number of economic activities that are eligible. The coverage will expand over the coming years. Although many of our financed activities such as renewable energy and sustainable property are in scope for determining Taxonomy-eligibility, a significant amount of financed activities are currently out-of-scope for determining Taxonomy-eligibility as Triodos Bank has significant exposures in sectors such as healthcare, education and arts and culture, which are currently not (yet) eligible. We expect that many of our activities, for example sustainable agriculture, are likely to be considered as eligible when the technical screening criteria for other environmental objectives come into force.
SMEs are out of scope, which comprise the largest part of our lending portfolio
The scope of the EU Taxonomy was reduced to only include large corporations subject to the Non-Financial Reporting Disclosure (NFRD). Due to an expected high reporting burden and low(er) comparability of information for smaller counterparties, SMEs (Small and Medium-sized Enterprises) are not yet in scope for the Taxonomy reporting requirements, apart from green bonds as indicated in the Commission Art 8 FAQ of December 2021. Triodos Bank has a high exposure to SMEs within its banking activities, but also in the alternative investment funds which mainly consist of unlisted SMEs. Both of these significant exposures will not be covered under the current Taxonomy mandatory reporting.
Although we strongly believe a significant portion of our SME exposures will be Taxonomy-eligible and even Taxonomy-aligned, Triodos has chosen not to include Taxonomy-eligible SME exposures for lending outside of green bonds in the first year of voluntary reporting. We will await further guidance from the EU on these exposures as we want to prevent large deviations and potential misrespresentations between estimations for Taxonomy-eligibility between voluntary disclosures and mandatory disclosures.
Mandatory disclosure rules only allow direct customer Taxonomy information, which is not yet available
As 2022 is the first year in which NFRD counterparties will provide direct input on their Taxonomy figures, no mandatory disclosure using direct client input is possible for Triodos Bank over FY2021. This means that our mandatory disclosure figures will be very limited due to limited exposures towards undertakings under an obligation to report under the NFRD. As we see a responsibility in maintaining our frontrunner role in sustainable finance, we have chosen to provide voluntary disclosure on the EU Taxonomy where we use counterparty NACE codes and client impact data to estimate whether they are Taxonomy-eligible.
According to the EU Taxonomy FAQ all descriptions of economic activities included in Annexes I and II to the Climate Delegated Act provide that the economic activities in the respective category can correspond to one or more specific NACE codes. Only the specific activity description in the Climate Delegated Act sets out the exact scope of the activities included in the Act, meaning that while the NACE classification can be supportive, the Technical Screening Criteria are directive. While recognising that an accurate description of economic activities is more exact than using a company NACE code, Triodos Bank has used the NACE code as a first proxy in this first year of voluntary reporting, together with impact data for counterparties in the renewable energy sector. We expect to increase the use of direct client Taxonomy information in the coming years of reporting.
Triodos Bank N.V. 2021 Taxonomy-eligibility figures 3
In the current limited EU Taxonomy definitions, 35.1% of Triodos Bank’s covered assets can be considered Taxonomy-eligible (according to mandatory disclosure).
The first table shows the assets excluded for the GAR calculation and the assets covered for the GAR calculation. Per 31 December 2021, Triodos Bank has a balance sheet total of EUR 16.6 billion excluding allowance for ECL (expected credit loss). Of these total assets, EUR 10.9 billion (65.7%) is included in the denominator (our covered assets). Of the covered assets, EUR 4.0 billion, or 37.2 % is Taxonomy-eligible according to our voluntary disclosure. EUR 5.7 billion, or 34.3% of total assets, are excluded from the GAR calculation. The excluded assets stem mainly from cash exposures to central banks and from exposures to sovereigns.
This eligibility percentage seems low when considering our mission. This mainly results from the high exposure to SMEs that are not obliged to disclose Taxonomy-related information. EUR 6.0 billion of the EUR 6.4 billion assets in the denominator (55.3% of the covered assets and 36.3% of total assets) refer to exposures to (non-) financial counterparties that are not subject to NFRD disclosure and are therefore not obligated to report on the EU Taxonomy. This is mainly driven by SMEs and UK exposures, which being outside the EU, fall outside the scope of the EU Taxonomy.
Additionally, no direct counterparty information has been received over 2021 for the majority of our business loans and Treasury positions, resulting in a near-zero Taxonomy-eligibility percentage in the mandatory disclosure for these segments. Therefore the main driver of our Taxonomy-eligibility score is our exposure to mortgages which relate to real-estate activities and are eligible for climate change mitigation. Other eligible activities are driven by specialised lending to local governments and green bonds. The final category of eligible assets relates to residential and commercial immovable property that was obtained through possession. These assets are linked to real estate and are therefore considered Taxonomy-eligible.
Balance sheet items
Gross Carrying Amount
Percentage of total assets
Of which: Assets excluded for GAR calculation
Sovereigns (exposures to regional and central governments and regular lending to local governments)
Central banks exposure
Of which: Assets covered for GAR Calculation
Assets covered for GAR Calculation
Gross Carrying Amount
Total Assets covered for GAR Calculation
Of which: GAR - assets in numerator
Green and sustainable bonds
Financial corporations subject to NFRD disclosure obligations
Non-financial corporations subject to NFRD disclosure obligations
Specialised lending to local governments
Collateral obtained by taking possession: residential and commercial immovable properties
Of which: Assets excluded from the numerator for GAR calculation (covered in the denominator)
Financial corporations not subject to NFRD disclosure obligations (EU)
Non-financial corporations not subject to NFRD disclosure obligations (EU)
Non-EU country counterparties not subject to NFRD disclosure obligations
On demand interbank loans
Cash and cash-related assets
Other assets (e.g. Goodwill, commodities etc.)
The voluntary disclosure relates to the mandatory disclosure figures but includes the NFRD counterparties for which Taxonomy-eligibility is estimated using counterparty NACE codes4 and impact data for counterparties in the renewable energy sector. Of the covered assets, EUR 4.0 billion, or 37.2% is Taxonomy-eligible in our voluntary disclosure which is a minor increase compared to the mandatory disclosure. The voluntary disclosure does not lead to a significantly higher eligibility percentage as only EUR 416 million of our exposures relate to counterparties that are obliged to report on Taxonomy information in their non-financial disclosures, which is 3.8% of the covered assets. Of these NFRD-obligatory counterparties, EUR 103 million relates to exposures to financial counterparties which are not eligible as financial services activities are generally not considered to be eligible except for certain insurance activities. We do expect to report information on the eligibility of these financial institutes when we receive their direct eligibility disclosures.
EUR 224 million (71.6%) of the non-financial corporations subject to NFRD disclosure obligations are Taxonomy-eligible based on their NACE code or when they generated renewable energy according to our impact reporting data. These companies are mainly active in the energy industry, real estate and manufacturing. The counterparties that are not eligible are fairly fragmented regarding activities but are mainly present in activities of holdings, other personal activities, human health and social work activities. We expect the Taxonomy-eligibility ratio to increase significantly over the coming years when the scope of the EU Taxonomy expands to other environmental objectives, actual Taxonomy-eligibility information is obtained and eligibility assessments extend beyond NACE codes.
Within Triodos Investment Management, EUR 289 million assets under management (excluding Private Banking and Stichting Hivos Triodos) are Taxonomy-eligible under our voluntary disclosure, which amounts to 35.6% of assets under management for corporates subject to NFRD disclosure and 5.3% of total assets under management. Only 15% of assets under management are exposures to corporates subject to NFRD disclosure obligations as a large part of the portfolio relates to smaller, not-listed counterparties. The 35.6% eligibility ratio is mainly driven by equity holdings in the energy and manufacturing industries. All investments of Triodos are invested for positive impact (in line with EU SFDR article 9). A subset of these investments have EU Taxonomy-related objectives as core focus of the funds. Other investments have non-EU Taxonomy environmental objectives or social objectives.
More information on how we applied the EU Taxonomy reporting, the assumptions we made and the limitations that we experience are disclosed in Appendix VII, which also contains the full reporting table based on the Delegated Act annex VI.
Assets under management
Net asset value
Total assets under management1
Of which: debt securities
Of which: equity instruments
Total assets under management - Corporates subject to NFRD disclosure obligations
Of which: debt securities
Of which: equity instruments
Compliance with the Taxonomy regulation: how the Taxonomy fits into Triodos Bank
This section elaborates on the compliance with the EU Taxonomy within our business strategy, product design processes and engagement with clients and counterparties. Sustainability is a core value of Triodos Bank and is integrated into nearly all our activities. Since its founding, Triodos Bank has been aware of the impact that its investment and finance decisions have on society, both positive and negative. There is no such thing as a neutral financial exposure, allocating capital (by investing or lending) should be done consciously considering both the environmental and social impact.
The following procedures are in place at Triodos Bank to determine whether underlying activities (of financial products, loans, etc.) qualify as sustainable. Within our business activities, our Lending Citeria and transition theme criteria are used to screen for positive social, environmental, and cultural impact. Our Minimum Standards lay out the absolute minimum requirements of any economic activity we lend to or invest in. The Engagement and Stewardship policy explains how Triodos Investment Management engages with their counterparties to improve the positive impact made and reduce the negative impact, whether that be environmental or social. It should be noted that these policies do not necessarily follow the technical screening and do no significant harm (DNSH) criteria set by the EU Taxonomy.
As sustainability is embedded in the DNA of Triodos Bank, each department is responsible for ensuring sustainability is incorporated within the design and functioning of our products. An interdisciplinary team within Group Finance performs the EU Taxonomy analysis and reporting for Triodos Bank N.V. under the responsibility of the Group Director Finance and in strong collaboration with the Legal team and other teams implementing sustainable finance regulations. We maintain a dynamic methodology document explaining our reporting decisions and how underlying activities qualify as environmentally sustainable. A condensed version will be published along with the first publication of our Taxonomy KPIs.
The focus for this first year was to create insight into which counterparties need to disclose on EU Taxonomy-related investment management information. Triodos Bank periodically collects information from our clients on impact data to inform our stakeholders about what happens with their money. As a result of the EU Taxonomy, the requests for information to our clients will increase. Triodos Bank will remain in discussion regarding the feasibility of the data collection among SMEs (which are currently not yet in scope for Taxonomy reporting). In the future we will need to review our pre-contractual documents and periodic reports in order to collect information relevant for the EU Taxonomy. Additionally, relevant information concerning Taxonomy-eligibility and Alignment for existing and new counterparties will have to be integrated in relevant processes such as the loan origination process for general and project-specific lending, and loans and mortgages documentations for household mortgages or building renovation loans.
We recognise the disclosures are mainly created from a Triodos Bank perspective. In this first year of implementation of EU Taxonomy-related disclosures, Triodos Bank has had to operate within a short timeframe and with many uncertainties in interpreting the Delegated Acts and additional FAQs. In the future our business strategy, product design processes and engagement with clients and counterparties may need to be more clearly linked to the EU Taxonomy when we have both more clarity and guidance on the EU Taxonomy from regulatory bodies and when we have insights from the market and stakeholders on how the EU Taxonomy is applied.
- Call for feedback on the draft reports by the Platform on Sustainable Finance on a social Taxonomy and on an extended Taxonomy to support economic transition | European Commission (europa.eu)
- In Article 10 of the Disclosures Delegated Act, only reference is made to (on balance) total assets. Assets under management is not explicitly mentioned as a mandatory requirement for eligibility reporting. It may therefore be concluded that no mandatory disclosure is required on AuM. Additionally, no direct investee information has yet been obtained meaning that under the mandatory disclosure rules no reporting on Taxonomy-eligibility can be provided or would amount to zero. Nonetheless we have chosen to disclose on a voluntary basis the eligibility of our assets under management as transparency is one of our core values and voluntary disclosures are encouraged by the EC.
- The full reporting template is included in Appendix VII
- NACE stands for Statistical Classification of Economic Activities in the European Community, or as originally used in French: Nomenclature Statistique des Activités Économiques dans la Communauté Européenne. For more information, see Regulation (EC) No 1893/2006.