Taxonomy

The application of EU taxonomy throughout our business activities facilitates sustainable investment and helps to accelerate decarbonisation.

European Union (EU) taxonomy provides a standardised, science-based classification system for identifying environmentally sustainable economic activities. It acts as an important facilitator to support sustainable investment and accelerates the decarbonisation of the European economy, while giving investors security and transparency and supporting companies in planning a roadmap toward net zero emissions.

At Endesa we are fully committed to reporting on the application of the European Union Taxonomy Regulation (article 8 of the regulation and subsequent delegated acts specifying to a greater extent the content, methodology and presentation of information to be disclosed by both non-financial and financial entities).

While the Taxonomy Regulation requires that companies declare compliance with the taxonomy from January 2022, we have already became pioneers in this area and beginning to report on its implementation on the 2021 Capital Market Day.

We also support the different taxonomy thresholds defined on the basis of climate and environmental science, as the overall life cycle intensity limit of 100 g of CO2eq/ kWh to measure the substantial contribution to climate change mitigation established for most power generation technologies, being derived from a robust and scientific analysis process.

However, there are activities which, while not necessarily qualifying for the EU taxonomy, are essential to promoting the well-being of Europeans, especially in the short and medium term, while contributing to the sustainable development of Europe in the long term. In this regard, Endesa strongly believes that the EU taxonomy should explicitly consider the activity of retail energy sales as an eligible activity, based on the same criteria defined for electricity production activities. This is even more relevant in integrated utilities, which, although operating in the energy production and energy marketing segments with different companies within the same Group, the business model is executed following a comprehensive and unique vision of the entire energy value chain.

Implementation process

 We have deployed a five-step process to analyse the applicability of the EU taxonomy throughout the value chain, within the global Enel process. This process involved relevant functions at the corporate level and all lines of business. These five steps are:

Eligibility of Endesa's activities

Through the above process, we have classified all our economic activities along the value chain according to the following three categories: eligible-aligned, eligible-non-aligned, ineligible.

General results

In 2023, the degree of alignment of our economic activities with EU taxonomy, as a result of our contribution to the objective for climate change mitigation without harming other environmental objectives and respecting minimum social guarantees, was as follows:

Income

• 15.6% of turnover in 2023 corresponds to business activities aligned with the EU Taxonomy Regulation, compared to 10.9% in 2022.
• This increase in 2023 was mainly based on an increase in eligible-non-aligned activities such as power generation from gaseous fuels and ineligible activities such as trading and retailing of electricity and gas, mainly due to the increase in prices due to the market. 

Fixed operating expenses (OPEX).

• 46.0% of Fixed Operating Expenses (Opex) was generated by eligible business activities aligned with the EU taxonomy, compared to 41.2% in 2022.
• The percentage of eligible taxonomy-aligned Fixed Operating Expenses increases in 2023 compared to 2022, mainly due to higher maintenance costs incurred in renewable energy production and taxonomy-aligned distribution activities.

Gross operating income (EBITDA)

• 69.9% of EBITDA in 2023 corresponds to business activities aligned with the EU Taxonomy Regulation, compared to 47.9% in 2022.
• This increase in 2023 is due to a decrease in EBITDA from eligible non-aligned (combined cycle) and non-eligible (trading) activities, which increases the weight of aligned activities. 

Investments (CAPEX)

• In 2023, 75.8% of the capital expenditure (CapEx) is associated with business activities aligned with the EU Taxonomy Regulation, compared to 76.4% in 2022. 
• There is a slight decrease in the percentage of CapEx allocated to eligible activities under the taxonomy in 2023 compared to 2022, primarily due to reduced investments in wind energy generation.