EU Taxonomy
Introduction to the EU Taxonomy Regulation
The EU Taxonomy Regulation entered into force on July 12, 2020 and establishes the general framework for determining whether an economic activity qualifies as environmentally sustainable for the purposes of establishing the degree to which an investment is environmentally sustainable. The EU taxonomy framework will develop over time.
On April 21, 2021, the EU Commission adopted the Commission Delegated Regulation (EU) 2021/2139 of June 4, 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives (the Climate Delegated Act), which became effective in January 2022.
The EU Commission further adopted the Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by specifying the content and presentation of information to be disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EU concerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation (the Article 8 CDR), which also became effective in January 2022.
On March 9, 2022, the EU Commission adopted a complementary climate delegated act including, under strict conditions, specific nuclear and gas energy activities in the list of economic activities covered by the EU taxonomy. It was published in the Official Journal on July 15, 2022 and became effective in January 2023.
In this section we present our compliance with the EU Taxonomy Regulation, the Climate Delegated Act, the Article 8 CDR and ancillary legislation applicable to us.
Compliance with the EU Taxonomy Regulation
In 2022 we performed a reassessment of all potential taxonomy-eligible economic activities listed in the Climate Delegated Act based on our activities as a biopharmaceutical group for the current year’s activity. The Climate Delegated Act focuses on those economic activities and sectors that have the greatest potential to achieve the objective of climate change mitigation or climate change adaption. The sectors covered include energy, selected manufacturing activities, transport and buildings. Our assessment methodology is listed below.
Companies are required to identify if their activities are eligible under the EU Taxonomy Regulation. Our main activity is NACE 72.11 – Research and experimental development on biotechnology. Our assessment of taxonomy-eligibility is focused on economic activities, defined as the provision of goods or services on a market, thus (potentially) generating revenues. In this context, we, as a commercial-stage biopharmaceutical group, define the research and development and marketing of pharmaceutical products as the core of our business activities. We define activities such as the manufacturing or the transport of our pharmaceutical products to our clients as underlying activities necessary to conduct our core business activities.
Turnover Eligibility and Alignment
These activities do not contribute to climate adaptation or climate mitigation, therefore, they are not reported as taxonomy-eligible activities and not included in our turnover key performance indicators (KPI). We have concluded that as eligibility is nil, alignment related to turnover is also considered to be nil and totals 0%. Our net turnover KPI denominator totals $400.7 million. Non-financial undertakings related to turnover are included in the consolidated financial statements, under footnote 15, product net sales.
We will continue to monitor any future reporting obligations and their impact, including the addition of four new taxonomy environmental objectives. We acknowledge these additional requirements and will include these calculations in future assessments.
CapEx Eligibility and Alignment
We have reviewed our core and non-core activities related to CapEx as defined by the taxonomy regulations in accordance with the updated requirements relating to the fiscal year 2022. These activities do not contribute to climate adaptation or climate mitigation. We have concluded that as eligibility is nil, alignment related to CapEx is also considered to be nil and totals 0%. We have concluded that our denominator for calculation of CapEx KPIs, covering tangibles and intangible assets during the financial year (as listed in Annex I, point 1.1.2.1 of Article 8 CDR) total $108.2 million. Non-financial undertakings related to CapEx are listed in the consolidated financial statements, included in footnote 4, property, plant and equipment and footnote 5, Intangible assets.
We will continue to monitor any future reporting obligations and their impact, including the addition of four new taxonomy environmental objectives. We acknowledge these additional requirements and will include these calculations in future assessments.
After a thorough review involving all relevant divisions and functions, we concluded that our core and non-core economic activities related to CapEx are not covered by the Climate Delegated Act and consequently are taxonomy-non-eligible and total 0%.
OpEx Eligibility and Alignment
We have reviewed our core and non-core activities related to OpEx as defined by the taxonomy regulations in accordance with the updated requirements relating to the fiscal year 2022. These activities do not contribute to climate adaptation or climate mitigation; therefore, they are not reported as taxonomy-eligible activities
Additionally, we note that our non-core activities are non-taxonomy eligible, as we do not own or independently manage our offices or research sites and therefore any actions to improve energy efficiency are controlled by the building leaseholder, additionally, we do not manufacture or transport our products.
We have concluded that as eligibility is nil, alignment related to OpEx is also considered to be nil and totals 0%. We have concluded that our denominator for calculation of OpEx KPIs, covering non-capitalised costs such as research and development, building renovation, short-term lease, maintenance and repair, and day to day service of plant, property and equipment during the financial year (as listed in Annex I, point 1.1.3.1 of Article 8 CDR), total $663.4 million across research and development only, as the remaining topics defined are not currently part of operational expenditure. We acknowledge the addition of four new environmental objectives for assessment in future Taxonomy eligibility assessments and will continue to monitor, evaluate, and report against these criteria if eligible.
After a thorough review involving all relevant divisions and functions, we concluded that our core and non-core economic activities related to OpEx are not covered by the Climate Delegated Act and consequently are taxonomy-non-eligible and total 0%.
Future EU Taxonomy disclosures
We are committed to the continual and ongoing assessment of our taxonomy eligibility on an annual basis, we recognise the expansion of the taxonomy to include four new environmental objectives, should our economic activity become material in future years we will ensure to disclose our turnover, CapEx and OpEx KPIs in a tabular format in accordance with Annex II of Article 8 CDR. This table is currently not included for the reasons mentioned above, notably due to the fact that we concluded that our activities qualify as taxonomy-non-eligible activities (concurrently resulting in the absence of any taxonomy-eligible activities) and nil alignment with the environmental objectives listed under the EU Taxonomy Regulation, which will be reviewed annually.