SFDR & EU Taxonomy — alignment with CSRD
The European sustainable-finance trio

For asset managers, insurers, banks and institutional investors, sustainability compliance does not stop at CSRD. Three European regulations form a coherent triangle: CSRD (which produces companies' non-financial data), SFDR (which requires financial actors to disclose how they factor in this data in their products) and the EU Taxonomy (which classifies sustainable economic activities). NORMAXIS supports the alignment of these three frameworks for mid-cap companies and regional financial actors.

Frame SFDR / Taxonomy Back to CSRD pillar

The triangle

CSRD produces · SFDR consumes · Taxonomy classifies.

The three regulations target different actors and serve different purposes — but they are designed to feed each other. A datapoint captured in CSRD reporting feeds an SFDR PAI calculation and a Taxonomy alignment ratio.

CSRD Directive 2022/2464

Produces the data

Applies to large companies and listed companies. Requires the publication of sustainability reporting on the 12 ESRS standards, including carbon emissions, biodiversity impact, social conditions. Data are audited (limited then reasonable assurance).

SFDR Regulation 2019/2088

Consumes the data

Applies to financial actors: asset managers, financial advisers, insurers, pension funds. Requires transparency on the integration of sustainability risks (article 6) and on products with ESG characteristics (article 8) or sustainable investment objective (article 9). Portfolio PAI publication.

Taxonomy Regulation 2020/852

Classifies activities

Applies to both of the above: it provides a common language to qualify an economic activity as sustainable. Six environmental objectives, sector-specific technical criteria, DNSH (Do No Significant Harm) principle, social minimum safeguards. Alignment ratio to be disclosed.

SFDR PAIs

14 mandatory indicators + at least 2 optional.

Principal Adverse Impacts (PAIs) are the indicators that financial actors subject to SFDR must disclose on their portfolio — they reflect how investments adversely impact sustainability. Defined by the Delegated Regulation EU 2022/1288 of 6 April 2022 (SFDR RTS).

PAI 1 to 3 — Climate

GHG emissions (scopes 1, 2, 3), carbon intensity, portfolio carbon footprint. Data sourced from ESRS E1 of investee companies.

PAI 4 — Fossil fuels

Exposure to companies active in the fossil-fuel sector.

PAI 5 — Non-renewable energy

Share of non-renewable energy consumption and production.

PAI 6 — Energy intensity

Energy consumption intensity in high climate-impact sectors.

PAI 7 — Biodiversity-sensitive areas

Activities adversely affecting biodiversity-sensitive areas. Data sourced from ESRS E4. Covered by BPS at IRICE.

PAI 8 — Water emissions

Tonnes of emissions to water generated by investee companies.

PAI 9 — Hazardous waste

Hazardous and radioactive waste ratio.

PAI 10 to 14 — Social

UN Global Compact / OECD violations, gender pay gap, board diversity, controversial weapons, human rights.

Optional PAIs (≥2)

Manager's choice among: water, soil, forest, supply chain, working conditions, tax compliance…

EU Taxonomy

Six objectives, four conditions to meet.

The Taxonomy Regulation classifies economic activities that contribute substantially to an environmental objective, without significantly harming the others, and while respecting social minimum safeguards. The six environmental objectives:

1. Climate mitigation

Reduction of greenhouse-gas emissions. Sector-by-sector technical criteria (construction, transport, energy, industry…).

2. Climate adaptation

Activities that strengthen resilience to the effects of climate change.

3. Water & marine resources

Sustainable use and protection of aquatic and marine resources.

4. Circular economy

Transition to a resource-efficient and circular economy.

5. Pollution prevention

Prevention and reduction of air, water and soil pollution.

6. Biodiversity & ecosystems

Protection and restoration of biodiversity and ecosystems. DNSH criterion covered by BPS at IRICE.

DNSH (Do No Significant Harm) and minimum safeguards

For an activity to be aligned with the Taxonomy, contribution to one objective is not enough. The activity must also not significantly harm the five other objectives (DNSH criterion), and respect social minimum safeguards: OECD Guidelines for Multinational Enterprises, UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Rights, International Bill of Human Rights. DNSH documentation is the most time-consuming part of Taxonomy alignment — especially DNSH criterion 6 biodiversity for real-estate activities.

French specificity

Article 29 of the French Energy-Climate Act 2019-1147.

In France, the Energy-Climate Act of 2019 (law no. 2019-1147 of 8 November 2019) introduced at its article 29 a non-financial reporting obligation for French institutional investors, distinct from but articulated with SFDR. The implementing decree (decree no. 2021-663 of 27 May 2021) codified at article D. 533-16-1 of the French Monetary and Financial Code specifies the content:

  • Article 29 LEC covers in-scope entities: asset management companies, insurance companies, mutuals, pension institutions, retirement funds.
  • Information on the integration of ESG criteria in the investment policy: climate risks, biodiversity, Paris Agreement alignment, fossil-fuel exit strategy.
  • Specific biodiversity obligation — France is ahead of SFDR on this axis. French institutional investors must produce a biodiversity strategy and indicators, aligned with the Kunming-Montréal national framework.
  • Articulation with SFDR: the French AMF doctrine accepts that a complete SFDR report may serve article 29 LEC compliance, provided the French-specific elements are also covered.

NORMAXIS supports article 29 LEC compliance for real-estate and financial investors, leveraging BPS for the biodiversity axis and SFDR PAI alignment for the climate and social axes.

SFDR + Taxonomy benchmarks

Key structuring elements.

14 + 2

Mandatory + optional PAIs

SFDR RTS Delegated Regulation 2022/1288

6 objectives

Taxonomy environmental

Climate × 2, water, circular, pollution, biodiversity

DNSH

Do No Significant Harm

Criterion covered by BPS for objective 6

Art. 29

French Energy-Climate Act

Specific biodiversity obligation for investors

SFDR · Taxonomy FAQ

Frequently asked questions.

An article 8 product is a financial product that promotes environmental or social characteristics among others. It must describe how it integrates these characteristics, but has no exclusive sustainability objective. An article 9 product has the exclusive objective of sustainable investment — all positions in the fund must qualify as sustainable investments under SFDR, with a DNSH test and minimum safeguards. Reporting requirements (precontractual, annual report) are stricter for article 9.
An investment is sustainable if it meets three cumulative conditions: (1) contribute to an environmental or social objective, (2) do no significant harm to other objectives (DNSH principle), (3) respect good governance practices in financed entities. This definition is distinct — although related — from Taxonomy alignment. An investment may be sustainable under SFDR without being Taxonomy-aligned, and vice versa. ESMA frames the gradual convergence.
The 14 mandatory SFDR PAIs require quantitative portfolio data. These data are mostly produced by investee companies in their CSRD reporting. For example, PAI 1 (GHG scopes 1-2-3) directly maps to ESRS E1-6 datapoints. PAI 7 (biodiversity-sensitive areas) maps to ESRS E4 datapoints. For non-CSRD companies, the asset manager must either estimate (ENCORE, EXIOBASE, Bloomberg ESG methods…) or obtain voluntary data. Hence investor pressure on non-mandatory SMEs for compatible data.
For each company activity, you check: eligibility (is the activity listed in the Taxonomy delegated acts?), then alignment (does it meet the technical criteria for substantial contribution + DNSH + minimum safeguards?). The alignment ratio is disclosed on three dimensions: turnover, CapEx, OpEx. For asset managers, the fund ratio is the weighted average of investee companies. The calculation is significantly complex — especially DNSH documentation activity by activity.
Omnibus 2026 mainly targets CSRD and CS3D. The SFDR / Taxonomy track is handled separately: a targeted SFDR review is being prepared by the Commission (consultation 2024, proposal expected 2025-2026). Avenues considered: replacement of articles 6/8/9 with a clearer category system, simplification of PAIs, clarification of the notion of sustainable investment. For the Taxonomy, Omnibus simplifies some datapoints and lightens DNSH documentation for non-financial companies. The framework remains in motion — NORMAXIS tracks the developments.
Three tangible benefits. First, access to SFDR article 8/9 funds — managers of these funds target aligned assets in priority. Second, valuation premium — aligned assets generally benefit from a risk discount, hence a lower cost of capital. Third, regulatory anticipation — Taxonomy requirements will tighten (especially DNSH biodiversity). Already-aligned companies are shielded from the changes. NORMAXIS support covers activity-by-activity qualification and DNSH documentation production (in particular criterion 6 biodiversity via BPS).

Related pages

Linked NORMAXIS content.

NORMAXIS

CSRD — sustainability reporting

The directive that produces the data SFDR consumes. 12 ESRS standards, double materiality.

Découvrir

Irice

BPS — Biodiversity Performance Score

The 70+ criteria tool that feeds PAI 7 and DNSH criterion 6. Operated by IRICE as third party.

Découvrir

NORMAXIS

Ecological expertise

Fauna-flora ecological surveys feeding biodiversity-sensitive area assessment (PAI 7).

Découvrir

Framing your SFDR / Taxonomy compliance?

Scope analysis, PAI calculation (with PAI 7 biodiversity specialty via BPS), article 8 or 9 SFDR qualification, Taxonomy alignment ratio calculation, DNSH documentation, French article 29 LEC preparation, articulation with CSRD.

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