EU Taxonomy Regulation
As the European Union continues its journey towards a sustainable future, the EU Taxonomy emerges as a pivotal framework for defining and promoting sustainable economic activities. Launched with the EU’s ‘Fit for 55’ climate targets, the EU Taxonomy is part of the broader Sustainable Finance Package aimed at redirecting capital flows toward sustainable investments.
LEGISLATION OFFICIAL NAME
Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088
OFFICIAL INSTRUMENTS DOWNLOAD
EU Taxonomy Regulation - English - in force
EU Taxonomy Regulation - Francais - in force
EU Taxonomy Regulation - Deutsch - in force
EUROPA DATABASE LINK
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32020R0852
The EU Taxonomy is a classification system designed to assess the environmental sustainability of economic activities based on six key objectives, including climate change mitigation and adaptation. It supports companies and investors in determining which activities can be considered environmentally sustainable, promoting transparency in sustainable investment decisions.
The EU Taxonomy mandates the following entities:
Applicable to financial market participants and large companies under the SFDR, NFRD, and the amended CSRD/NFRD scope.
Financial entities will report on the Taxonomy alignment of financial products.
At the same time, non-EU and EU companies with significant European revenues and/or securities listed on EU markets must also comply.
The EU Taxonomy is built on the following timeline:
January 2022: Entities began disclosing the proportion of their eligible activities under the EU Taxonomy.
January 2024: Entities must report aligning their activities with the Taxonomy objectives.
2025: Financial entities must include Taxonomy alignment in their non-financial statements per CSRD regulations.
A gradual rollout for implementation has been set, with initial disclosures on Taxonomy eligibility starting in 2022. By 2025, entities will report on their Taxonomy-aligned activities' share of turnover, CapEx, and OpEx within their CSRD non-financial reports.
For businesses, adapting to the EU Taxonomy necessitates a thorough understanding of its criteria and a strategic integration into their existing operational frameworks. Companies must:
Engage with the criteria: Delve into the Taxonomy’s requirements and evaluate how they apply to their operations.
Plan for integration: Develop strategies to embed Taxonomy criteria into their business models and reporting.
Embrace continuous evolution: Anticipate future changes and refine their practices to align with the EU’s sustainability goals.
The EU Taxonomy is the compass for sustainable finance, guiding companies and investors towards environmentally beneficial activities. Its structured approach and transparent criteria are fundamental to Europe's transition to a greener economy and a testament to the EU's commitment to a sustainable economic future.