The Paris Agreement is the first universal, global climate treaty for climate adaptation, developing climate resilience and limiting global warming to no more than 2°C relative to pre-industrial levels. In line with this agreement, the EU set itself the goal of becoming climate neutral by 2050. To achieve those objectives, the EU launched an action plan for financing sustainable growth (the EU Action Plan) in March 2018. This action plan is part of the European Green Deal to make the European economy more sustainable. The three main elements of the EU Action Plan are:
re-orient capital flows toward a more sustainable economy;
make sustainability a permanent aspect of risk management;
encourage transparency and long-term thinking.
The next step was the adoption of the EU taxonomy, a classification system that shows whether cash flows support sustainable business activities.
The EU taxonomy serves six environmental objectives:
climate change mitigation;
climate change adaptation;
sustainable use and protection of water and marine resources;
transition to a circular economy;
prevention and control of pollution;
protection and restoration of biodiversity and ecosystems.
In line with regulations, Alliander reports according to the EU taxonomy. The obligation for 2021 only concerns the first two environmental objectives (mitigation of and adaptation to climate change); in subsequent years, all the environmental objectives must be included in the report.
In concrete terms, the report must include the following information relating to the first two environmental objectives:
Identification of the eligible activities of Alliander. In the context of EU taxonomy reporting, this relates to Alliander's activities in connection with transmitting and distributing electricity and heat, and these climate-related business activities are classified as sustainable.
Details of the revenue, CAPEX (investments) and OPEX (operating expenses) per activity, both in amounts and as a percentage of the total.
Climate-related economic activities
A) Taxonomy of eligible activities
4.9 Transmission and distribution of electricity
4.15 Distribution of district heating and cooling
Total for eligible business operations
B) Taxonomy of non-eligible activities
Other business operations
Total for Alliander
For determining climate-related business activities, the EU taxonomy is consistent with the existing European system for classifying economic activities by sectors (NACE). Alliander reports on the following eligible business activities under the EU taxonomy: ‘Transmission and distribution of electricity’ and ‘District heating/cooling distribution’. The non-eligible activities under the taxonomy mainly concern the distribution of natural gas, which is not currently included as a climate-related business activity in the EU taxonomy.
The ‘Transmission and distribution of electricity’ activity concerns the development, construction and operation of distribution systems for the transmission of electricity via high, medium and low voltage distribution networks. The ‘District heating/cooling distribution’ activity concerns the development, construction, renovation and operation of pipelines and related infrastructure for the distribution of heat and cold. The eligible business activities have no overlap so there is no duplication in the reported figures.
The revenue under the EU taxonomy is consistent with IFRS reporting standards and is therefore equal to the total operating income as included in the financial statements under note  (Net revenue) and note  (Other income). We have determined the proportion of total operating income that was generated with taxonomy-eligible activities. As far as possible, the existing split by business activities (electricity, gas, district heating and other) was used for this purpose. The existing NACE coding system of business activities was also followed for classification. The eligible revenue for Alliander includes the total operating income associated with:
providing the transmission, connection and metering services for electricity distribution, and also with installing, managing and leasing electrical installations (NACE 35.13) and
leasing district heating networks, providing the transmission service through local district heating networks and developing district heating networks (NACE 35.30).
The CAPEX under the EU taxonomy relates to investments in property, plant and equipment (note 3 in the financial statements), investments in intangible assets (note 4 in the financial statements) and additions to right-of-use non-current assets (note 3 in the financial statements).
The portion of the total investments that relates to taxonomy-eligible activities was determined by determining the economic activity to which each asset group is related and assessing whether this activity is mentioned in the EU taxonomy.
The EU taxonomy is currently not clear on the treatment of investments that are not directly related to the primary process; because these investments are limited in relation to the total CAPEX, they are included as part of the non-eligible activities.
The OPEX under the EU taxonomy is defined as the non-capitalised direct costs related to the maintenance of assets. Based on this definition, Alliander has only classified maintenance and outage expenses as operating expenses under the EU taxonomy. We have determined which part of these maintenance and outage expenses is related to taxonomy-eligible activities.
The EU taxonomy and associated criteria are still evolving. Consequently, this information is not yet part of the assurance report on the non-financial information, as presented on pages 202 - 205.