As the JRC found, DNSH is currently implemented through different methods, legal designs and assessment approaches across EU instruments. Public funding instruments use DNSH in different ways: to exclude harmful projects, to improve the environmental performance of supported activities, and in some cases to steer funding towards the highest-performing options. This fragmentation makes the framework harder to apply consistently and increases administrative burden for authorities and beneficiaries.
Single DNSH guidance for the next MFF could therefore bring real benefits. The Commission itself envisages a single and simple set of clear, ex ante criteria to reduce complexity, avoid duplicative reporting, improve synergies across funds and make implementation more consistent where feasible and appropriate. The JRC likewise points to the value of a common methodological basis and, where useful, common exclusion approaches and technical guidance for priority sectors. For the next MFF, this would help make DNSH more predictable, more coherent across instruments and more operational in practice.
At the same time, the new framework should not mechanically copy the Taxonomy. Public funding instruments do not legally require full compliance with the Taxonomy’s technical screening criteria and often need more operational, proportionate and sector-specific approaches. The JRC is clear that none of the funding instruments analysed legally requires the use of the Taxonomy technical screening criteria, even where the Taxonomy serves as an important reference point.
It is important that the future guidance provides more detailed, sector-specific direction, building where appropriate on existing standards such as the EU Taxonomy and the Social Climate Fund guidance, while keeping exceptions to the absolute minimum. BETTER FINANCE considers this balance essential: the future guidance should keep the Taxonomy as a reference point, while delivering simpler ex ante rules, clearer sector guidance and very limited exceptions.
While this guidance will primarily be used by public authorities, implementing bodies and other specialised stakeholders, a clearer and more harmonised DNSH guidance would also improve transparency, consistency and credibility for retail investors and citizens. That matters because inconsistent public use of DNSH can undermine confidence in the wider EU sustainable finance framework. A more coherent approach would therefore not only make the rules more workable in practice, but also strengthen trust that EU spending genuinely supports long-term sustainability.