Do No Significant Harm (DNSH)
Do No Significant Harm (DNSH) is the test every taxonomy-aligned activity must pass for all five environmental objectives it does not Substantially Contribute to. DNSH is frequently the harder test to pass than the Substantial Contribution criteria — and the most commonly failed element in taxonomy alignment assessments.
Do No Significant Harm (DNSH) is the test every taxonomy-aligned activity must pass for all five environmental objectives it does not Substantially Contribute to. For every taxonomy-aligned activity, you must demonstrate it does not significantly harm any of the five objectives it does not Substantially Contribute to.
How DNSH works in practice
For every taxonomy-aligned activity, you must demonstrate it does not significantly harm any of the five objectives it does not Substantially Contribute to. The six objectives are: (1) Climate Change Mitigation, (2) Climate Change Adaptation, (3) Water and Marine Resources, (4) Circular Economy, (5) Pollution Prevention and Control, (6) Biodiversity and Ecosystems.
Example: A wind farm Substantially Contributes to Objective 1 (Climate Mitigation). It must pass DNSH for Objectives 2, 3, 4, 5, and 6.
DNSH for Objective 2 (Adaptation): Has a physical climate risk assessment been conducted for the wind farm site? Is the project designed to withstand projected climate conditions over its lifetime?
DNSH for Objective 6 (Biodiversity): Is the wind farm sited in or adjacent to a Natura 2000 site, UNESCO World Heritage Site, or Key Biodiversity Area without adequate mitigation? Are bird and bat collision risk assessments completed?
Each DNSH criterion must be assessed and documented separately. A single DNSH failure means the activity is not taxonomy-aligned — regardless of how well it performs on the Substantial Contribution test.
The most commonly failed DNSH criteria
Biodiversity DNSH (Objective 6): The most frequently failed criterion for energy and infrastructure projects. Siting in or adjacent to protected areas, inadequate environmental impact assessments, or absence of biodiversity monitoring plans are common failure points. Renewable energy projects in particular face intensive biodiversity DNSH scrutiny.
Climate Adaptation DNSH (Objective 2): Activities must demonstrate physical climate risk has been assessed and the asset is designed to withstand projected climate conditions. Many companies have not conducted site-level physical climate risk assessments — making Objective 2 DNSH impossible to demonstrate.
Pollution DNSH (Objective 5): For manufacturing activities, DNSH requires compliance with EU best available techniques (BAT) conclusions for pollutant emissions. Companies subject to the Industrial Emissions Directive can use IED permit compliance as evidence — others must demonstrate equivalent performance.
Water DNSH (Objective 3): Activities in water-stressed areas face additional scrutiny. Water-intensive activities must demonstrate no significant deterioration of water body status under the EU Water Framework Directive.
Documenting DNSH for assurance
DNSH documentation is a significant assurance challenge — assurers need evidence for each DNSH criterion for each eligible activity at each site. For a company with multiple sites and multiple eligible activities, this produces a substantial evidence file.
Required documentation by DNSH objective:
Objective 2 (Adaptation): Physical climate risk assessment for each material site — can be a portfolio-level assessment from a commercial provider (Moody's, XDI) with site-level outputs.
Objective 3 (Water): Water risk assessment (WRI Aqueduct or equivalent) for each site; effluent quality monitoring records showing compliance with WFD standards.
Objective 5 (Pollution): IED permit compliance records; REACH substance inventory; soil contamination assessment for legacy sites.
Objective 6 (Biodiversity): IBAT screening for protected area proximity; environmental impact assessment records; biodiversity monitoring data.
Build a DNSH evidence matrix — one row per activity per site, one column per DNSH objective — with the evidence document reference for each cell. This is the structure assurers will work from.
Frequently asked questions
Is DNSH assessed at company level or activity level?
Activity level — and site level within each activity. A company with 10 wind farms must assess DNSH for each farm separately. A farm that passes all DNSH criteria contributes to aligned revenue/CapEx; one that fails (e.g. sited in a protected area) does not, even if the company's overall environmental performance is strong.
How does DNSH in the Taxonomy relate to DNSH in SFDR?
Both use the same six environmental objectives but apply them differently. Taxonomy DNSH assesses whether a specific economic activity causes significant harm. SFDR DNSH assesses whether an investment (in a company or asset) causes significant harm through the investee's activities. The conceptual framework is identical; the application differs.
Can an activity fail DNSH temporarily during a transition period?
The Taxonomy does not provide for temporary DNSH failures — either the activity passes at the assessment date or it does not. However, the CapEx KPI includes a CapEx plan provision — capital expenditure in a transition plan to become taxonomy-aligned can be classified as eligible even if the activity is not yet aligned. This provides a pathway for activities transitioning to DNSH compliance.