Italian Sustainable Investment Forum
The Taxonomy simplification enters into force. First effects of ESMA guidelines on ESG fund names. EFRAG publishes practical guidelines for SMEs
2026 opens with several developments on the regulatory and institutional front: EU Taxonomy simplification, updates to ESG standards, the impact of ESMA guidelines on ESG fund names, new EU guidelines for ESG stress tests, and the announcement of a new Chinese climate reporting standard.
As of 1 January, important simplifications to the Taxonomy framework have entered into force. These stem from the Delegated Act approved at the end of 2025, which reduces reporting burdens for both financial and non‑financial undertakings. Under the recent amendments, companies are no longer required to assess the eligibility and alignment of activities deemed non‑material (i.e., those representing less than 10% of revenues, CapEx or OpEx). Furthermore, key KPIs such as the GAR have been simplified by excluding marginal elements, such as derivatives, liquidity, and donations. Financial institutions may refrain from publishing their KPIs until 2028, under certain conditions.
Alongside the entry into force of the Act, the European Commission has published a set of Q&As clarifying the opt‑out procedures for financial operators, the comparability of KPIs under the two regimes, and further guidance on the correct application of the financial materiality principle and on the assessment of material activities within KPIs.
ESG funds names: ESMA analyses the first effects of its guidelines
ESMA has reviewed nearly 1,000 notifications to shareholders from 2025 — regarding more than 900 investment funds — to assess the impact of its guidelines on the use of ESG‑related terms in fund names.
The analysis highlights a significant realignment of the market: 64% of funds have changed their names, and more than half have updated their investment policies, often introducing new exclusions on fossil fuels. In many cases, ESG terms have been removed or replaced with expressions that more accurately describe the underlying strategies. This shift enhances clarity for investors and reduces the risk of greenwashing.
Three new practical guides for SME sustainability reporting
The European Financial Reporting Advisory Group (EFRAG) has published three documents to support SMEs preparing to apply the VSME standard. The guides focus on three particularly complex areas:
- transition policies and initiatives (C2)
- defining and reporting greenhouse gas reduction targets (C3)
- managing adverse impacts on human rights (C7)
The materials include practical examples, case studies and operational guidance designed to facilitate the adoption of the standard by smaller companies.
A new sustainability reporting standard in China
China has launched the “Corporate Sustainable Disclosure Standard No. 1 – Climate”, the country’s first climate‑related reporting standard. Initially voluntary, the standard is expected to expand gradually and may become mandatory in the future. The framework is aligned with IFRS S2, adopts a double‑materiality approach, and requires disclosures consistent with the GHG Protocol (Scope 1, 2, and 3 emissions), scenario analysis, and forward‑looking information. According to government indications, sector‑specific guidelines covering the entire value chain will be published at a later stage.
New joint ESAs guidelines for ESG stress tests
The European Supervisory Authorities (ESAs) have released a document containing new guidelines for national supervisory authorities to harmonise their approach to ESG risk stress testing. The guidance covers the definition of methodologies, the scope of risks across different portfolios and sectors, the need for specialised supervisory skills, and the importance of appropriate timelines. The application will start from 1 January 2027.
