Information on the EU Taxonomy Regulation

Background Information

As part of the European Green Deal to achieve climate neutrality in the European Union by 2050, the EU Taxonomy Regulation was adopted as an instrument for classifying environmentally sustainable economic activities. The EU Taxonomy Regulation is a key element of the European Commission’s action plan to redirect capital towards a more sustainable economy. The Regulation uniformly assesses predefined economic activities with regard to their contribution to achieving the six environmental objectives of the European Commission, with the aim of achieving better comparability of companies.

This section presents the share of Group revenue, capital expenditure (Capex) and operating expenditure (Opex) for the 2022 reporting period related to the first two environmental objectives of the European Commission (climate protection and adaptation) that are taxonomy-eligible or taxonomy-aligned in accordance with Article 8 of the Taxonomy Regulation and Article 10 (2) of the delegated act. At Fraport, all taxonomy-eligible or taxonomy-aligned economic activities contribute to the climate protection environmental objective.

Definitions

A taxonomy-eligible economic activity means an economic activity that is described in the current delegated acts on the climate objectives (climate protection and adaptation to climate change), irrespective of whether that economic activity meets any or all of the technical screening criteria laid down in those delegated acts. Conversely, all economic activities not described in the delegated acts are considered as taxonomy non-eligible.

A taxonomy-aligned economic activity means a taxonomy-eligible economic activity that meets the following requirements:

• The economic activity contributes clearly to one or more of the environmental objectives.
• It does not clearly affect any of the other environmental objectives (DNSH).
• It is performed in keeping with the minimum protection.

Revenue KPI

The share of the taxonomy-eligible Group revenue was calculated as the portion of net revenue from products and services related to taxonomy-eligible economic activities (numerator) divided by net revenue (denominator; the denominator corresponds to the Group revenue; see also Group Notes, note 5 Revenue).

Fraport generates revenue from products and services associated with taxonomy-eligible economic activities in the area of renting. This concerns the activity “7.7 Acquisition and ownership of buildings”. In addition, Fraport generates taxonomy-eligible revenue from the charging of costs for the passenger transport system within airport charges. This comes under the economic activity “6.3 Urban and suburban transport, road passenger transport”. The revenue from the passenger transport system is generated in the Aviation segment. Revenue from the renting of buildings is mainly reflected in the revenue in the Retail & Real Estate segment and the revenue in the International Activities & Services segment.

The revenue relating to the passenger transport system is taxonomy-aligned. Revenue in the area of the renting of buildings is not taxonomy-aligned as the relevant buildings do not meet the technical screening criteria.

Capital expenditure (Capex) KPI

The Capex KPI, which indicates the proportion of taxonomy-eligible capital expenditure, is defined as the ratio of capital expenditure eligible under the EU Taxonomy Regulation (numerator) divided by the total capital expenditure (denominator).

Total capital expenditure includes additions to property, plant, and equipment and intangible assets during the fiscal year. This includes the additions to property, plant, and equipment (IAS 16), intangible assets (IAS 38), rights of use (IFRS 16), and investment property (IAS 40; see also section “Additions to non-current assets” and Group Notes, note 20 Property, plant, and equipment).

At Fraport the numerator consists of the following categories for taxonomy-eligible capital expenditure:

• Capital expenditure relating to assets or processes associated with taxonomy-eligible economic activities (letter a) of Annex I to the delegated act pursuant to Article 8)
• Capital expenditure relating to individual measures enabling the target activities to become low-carbon or to lead to greenhouse gas reductions (letter c) of Annex I to the delegated act pursuant to Article 8)

Capital expenditure related to assets or processes associated with taxonomy-eligible economic activities (letter (a)) are to be allocated in particular to the economic activity “6.3 Local and urban passenger transport, passenger road transport”. Given that the economic activity or the operation of the passenger transport system cannot be carried out without the corresponding rail infrastructure or stations, we consider the related capital expenditures to be connected with the economic activity 6.3. In addition, the following taxonomy-eligible economic activities were also identified:

• 4.1. Electricity generation using solar photovoltaic technology
• 6.17. Low carbon airport infrastructure
• 7.1. Construction of new buildings
• 7.2. Renovation of existing buildings
• 7.3. Installation, maintenance and repair of energy efficiency equipment
• 7.4. Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings)
• 7.5. Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings

In order to avoid double counting when calculating the Capex ratio, capital expenditure that has already been taken into account under letter a) will only be taken into account once.

After examining the technical screening criteria, DNSH criteria and minimum protection requirements, taxonomy-aligned capital expenditure remains under the following economic activities:

• 4.1. Electricity generation using solar photovoltaic technology
• 6.3. Urban and suburban transport, road passenger transport
• 6.17. Low carbon airport infrastructure
• 7.4. Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings)
• 7.5. Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings

Operating expenditure (Opex) KPI

To determine the ratio of operating expenditure (Opex KPI), the taxonomy-eligible operating expenditure (numerator) according to the EU Taxonomy Regulation is set in relation to the operating expenditure (denominator).

The operating expenditure in accordance with the EU Taxonomy Regulation includes direct non-capitalized costs that relate to research and development, building renovation measures, short-term leasing, maintenance and repair, and any other direct expenditure relating to the day-to-day servicing of assets of property, plant and equipment by the undertaking or third party to whom activities are outsourced that are necessary to ensure the continued and effective functioning of such assets.

Thus, the definition of operating expenditure in accordance with the EU Taxonomy Regulation differs clearly from the definition of operating expenses used in the rest of the management report (see chapter “Glossary”). For example, no expenses for utility services, such as energy expenditure, are included in the definition according to the EU Taxonomy Regulation. The ratio for operating expenditure (denominator) is calculated in accordance with the EU Taxonomy Regulation based on the income statement and mainly includes maintenance expenses and other operating expenditure for rents and leasing. The taxonomy-eligible share in fiscal year 2022 results from maintenance expenses for the passenger transport system as well as maintenance expenses for rented buildings. In the same way as the revenue, the maintenance expenses for the passenger transport system are taxonomy-aligned.

Assessment of Taxonomy Alignment

Substantial contribution to the climate protection environmental objective

The following explains the extent to which the economic activities mentioned meet the criteria for the substantial contribution.

• The photovoltaic installation belongs to the economic activity “4.1. Electricity generation using solar photovoltaic technology”, as the installation is freestanding at Runway West, and in contrast to “7.6. Installation, maintenance and repair of energy efficiency equipment” is not connected to an existing building.
• The passenger transport system comes under the economic activity “6.3 Urban and suburban transport, road passenger transport”. The substantial contribution is met by criterion (a), as the passenger transport system does not cause any direct CO2 exhaust emissions. The same applies to investments in the passenger transport system in connection with the expansion of Terminal 3.
• Under economic activity “6.17. Low carbon airport infrastructure”, supplying aircraft with ground power falls under (b) 400 Hz installations. Because ground power supply and preconditioned air supply are usually provided by two different facilities, we assign the facilities that serve ground power supply, such as 400 Hz installations, to economic activity 6.17.
• The charging stations for the expansion of electromobility come under economic activity “7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings)”. As the substantial contribution is defined by the “Installation, maintenance or repair of charging stations for electric vehicles”, it is seen to have been met here.
• The exchange and modernization of technical centers (mainly in the existing Terminals 1 and 2 in Frankfurt) comes under the economic activity “7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings”. The substantial contribution is met by individual measure (b) “Installation, maintenance and repair of building automation and control systems, building energy management systems (BEMS), lighting control systems and energy management systems (EMS)”. The installation of smart meters also falls under economic activity 7.5 under (c) and the installation of facade and roofing elements with a solar shading or solar control function under (d).

The substantial contribution could not be proven for the taxonomy-eligible economic activities 7.1, 7.2 and 7.7. This is partly due to the non-existence of class A energy certificates.

No significant harm to the other environmental objectives – DNSH criteria

Avoiding significant harm to the environmental objective 2) Climate change adaptation is taken into consideration for all relevant economic activities through a climate risk and vulnerability assessment in accordance with Appendix A of Annex I on climate protection, in which the criteria for and scope of this type of analysis are defined. Various chronic and acute climate risks, which must be assessed for the sites where taxonomy-eligible activities are performed, are also specified.

In order to assess the climate risks, these were first checked with regard to the possibility of their occurrence. For the remaining risks, Fraport relies on the Munich Re “Location Risk Intelligence Platform”. The platform analyzes a site or portfolio with regard to various climate risks. Since the potential taxonomy-eligible economic activities for this year were identified exclusively at Fraport AG, the analysis was limited to the Frankfurt site. In order to illustrate the possible effects of climate change, the various climate projection scenarios (RCP scenarios) 2.6, 4.5, and 8.5 were assessed for the projection years 2030, 2050, and 2100. These are necessary for economic activities with a lifetime of over ten years. As the best and worse case scenario is covered by scenarios 2.6 and 8.5, and the remaining RCP scenarios lie within their bandwidth, they were not explicitly reanalyzed. For every risk identified, a risk assessment was made in the form of a score on the basis of the underlying scenarios. The overall risk score is divided into four levels from low to extreme. The report shows that the overall climate risk for the Frankfurt site is at level 2 in the “medium range”. This means that no climate risk was identified for the Frankfurt site that would clearly affect taxonomy-compliant economic activities.

The criteria for determining whether the environmental objectives 3) Sustainable use and protection of water and marine resources and 6) Protection and restoration of biodiversity and ecosystems, are impacted are particularly relevant for the photovoltaic and 400 Hz installations. The criteria primarily reference environmental impact assessments or comparable assessments that have already been examined as a prerequisite for obtaining permits for the construction and operation of the facilities. No further measures were therefore required for compliance.

The criteria for environmental objective 4) Transition to a circular economy are also relevant in the context of the passenger transport system in addition to the photovoltaic and 400 Hz installations. Fraport AG is already obliged to comply with the criteria under the regulations of European and German waste legislation, in particular Section 6 of the German Waste Management Act and the associated waste hierarchy. Furthermore, environmental objective 5) Pollution prevention and control is also relevant for the passenger transport system and the 400 Hz installations. The criteria are insubstantial for the passenger transport system as this exclusively relates to class M road vehicles. The passenger transport system does not fall under class M. Fraport is already obliged to comply with the criteria for the 400 Hz installations by German legislation, such as the Noise and Vibration Occupational Health and Safety Regulation and other general occupational health and safety ordinances.

No DNSH criteria are defined for the economic activities under 7.4 and 7.5 for the further environmental objectives 3) to 6).

Fulfillment of minimum protection measures

As part of the minimum protection, various requirements are made regarding the implementation of procedures, which are based, among other things, on the OECD Guidelines for Multinational Enterprises, and the UN Guiding Principles on Business and Human Rights as well as other regulatory initiatives. The fulfillment of the required minimum protection is a prerequisite for classifying an economic activity as ecologically sustainable and thus taxonomy-aligned. To implement and ensure minimum protection, Fraport has aligned itself with the Draft Report on Minimum Safeguards from the Platform on Sustainable Finance of July 11, 2022. The main focus of this report was on human rights, corruption and bribery, taxation, and fair competition.

In assessing compliance with the minimum protection, we evaluated whether adequate processes were implemented for each of the above topics to avoid negative impacts. Furthermore, the results of the respective measures taken are examined on an ongoing basis to determine whether the measures taken are effective in preventing negative impacts.

For the measures that Fraport has implemented in the thematic fields of human rights, and corruption and bribery, reference is made to explanations within this non-financial statement under “Business model-specific consideration of the supply chain and procurement”, “Respect for human rights” and “Tackling corruption and bribery”.

In the thematic field of “Taxation”, Fraport is subject to the country-specific tax laws and regulations, the implementation of and compliance with which is monitored and ensured by the Tax department and external and internal audits. Regular compliance risk analyses and employee training are carried out in the areas of antitrust and competition law.