Do no significant harm (DNSH) principle
A condition of the EU taxonomy under which an activity can only be called sustainable for one environmental objective if it does no significant harm to any of the other five.
The DNSH principle is set out in article 17 of Regulation (EU) 2020/852, known as the Taxonomy Regulation. It lays down six environmental objectives: climate change mitigation, adaptation, water and marine resources, circular economy, pollution prevention, biodiversity. To be aligned, an activity must contribute substantially to one of them, cause no significant harm to any of the others, respect minimum social safeguards and meet the technical criteria of the delegated acts. DNSH is thus a negative screen: a hydropower plant that cuts emissions but destroys a river ecosystem fails the test. The principle has spread beyond the taxonomy: it also conditions spending funded by the Recovery and Resilience Facility. For insurance, it applies in two places. On the asset side, in the share of aligned investments the insurer discloses. On the liability side, because the 2021 Climate Delegated Act recognizes non-life underwriting of climate perils as an activity contributing to adaptation, provided in particular that the insurer does not in effect exclude the risks it claims to cover and shares its loss data. The principle is criticized for its documentation burden; it remains the only lock that stops an activity from calling itself green on one criterion while breaching another.
Hypothetical case: an insurer wants to report its household line covering floods as aligned. The DNSH test requires it to show that its policies do not reward building in flood zones and that the related investments do not finance activities harmful to biodiversity; without proof, the line stays outside the aligned ratio.
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