Overview
The EU Taxonomy Regulation (Article 17) requires that economic activities claiming environmental sustainability must not cause "significant harm" to any of six environmental objectives. Verdex integrates DNSH screening as part of the greenwashing detection system.
Why DNSH Matters for African Projects
European DFIs like FMO, DEG, Proparco, and BII are increasingly applying EU Taxonomy criteria to their investments. DNSH compliance is becoming a prerequisite for accessing European climate finance.
“Projects that fail DNSH screening may be excluded from EU Taxonomy-aligned portfolios, even if they contribute to climate mitigation.”
| Regulation | Effective Date | Impact |
|---|---|---|
| EU Taxonomy Regulation | July 2020 | Defines DNSH criteria for sustainable activities |
| SFDR Level 2 | January 2023 | Requires DNSH disclosure for Article 8/9 funds |
| EU Green Bond Standard | 2024 | Mandates DNSH compliance for green bonds |
| Corporate Sustainability Due Diligence Directive | 2026 | Extends DNSH to supply chains |
The 6 Environmental Objectives
Verdex evaluates projects against each of the six EU Taxonomy environmental objectives:
Climate Change Mitigation
Project must not lead to significant GHG emissions
Climate Change Adaptation
Project must be resilient to physical climate risks
Water & Marine Resources
No significant harm to water bodies or marine ecosystems
Circular Economy
Waste management and material efficiency
Pollution Prevention
No significant air, water, or soil pollution
Biodiversity & Ecosystems
Protection of ecosystems and habitats
DNSH Scoring Framework
Each objective is scored on a 0-4 scale, with a maximum total of 24 points:
| DNSH Score | Normalized | Status | Implication |
|---|---|---|---|
| 20-24 | 83-100% | COMPLIANT | Meets EU Taxonomy DNSH requirements |
| 12-19 | 50-79% | PARTIAL | Some objectives need attention |
| 0-11 | 0-49% | NON-COMPLIANT | Significant harm identified |
Integration with Greenwashing Detection
DNSH assessment is not a separate module—it's integrated into the greenwashing detection system as a "harm detection" layer.
Combined Greenwashing Score Formula
- • New fossil fuel extraction or infrastructure
- • Coal-related activities
- • Projects in critical habitats without ESIA
Technical Implementation
The DNSH evaluator uses AI-powered assessment with sector-weighted scoring:
// DNSH Assessment Types
interface DNSHCriterionResult {
objective: DNSHObjective;
objectiveName: string;
status: 'no_harm' | 'potential_harm' | 'significant_harm';
score: number; // 0-4
evidence: string;
concern?: string;
recommendation?: string;
isFundamentallyIncompatible?: boolean;
}
interface DNSHAssessment {
overallStatus: 'compliant' | 'partial' | 'non_compliant';
totalScore: number; // 0-24
normalizedScore: number; // 0-100
criteria: DNSHCriterionResult[];
keyRisks: string[];
recommendations: string[]; // Only for fixable issues
}
// Sector-weighted evaluation
const SECTOR_WEIGHTS: Record<Sector, Partial<Record<DNSHObjective, number>>> = {
mining: {
water_resources: 1.5, // Mining has higher water impact
biodiversity: 1.5, // Mining affects ecosystems
},
agriculture: {
biodiversity: 1.5, // Land use impacts
water_resources: 1.3, // Irrigation concerns
},
// ... other sectors
};- • Water stress: Higher weight in Sahel and North Africa
- • Biodiversity: Critical habitat mapping (Congo Basin, Madagascar)
- • Climate adaptation: Physical risk data from Open-Meteo
DNSH: Your Competitive Advantage
Verdex is the only hackathon project that integrates EU Taxonomy DNSH screening. This positions African projects for:
- European DFI compliance (FMO, DEG, Proparco, BII)
- EU Green Bond Standard eligibility
- SFDR Article 8/9 fund investment criteria